U.S. stocks edged up on Thursday as investors digested the narrow House vote passing President Trump’s expansive tax-and-spending package. The Dow Jones Industrial Average rose 0.2%, recovering from a steep 2% drop on Wednesday. The S&P 500 also gained 0.2%, while the tech-heavy Nasdaq Composite led the way with a 0.7% jump by midday trading.
The passing of the tax bill, secured by a single vote after last-minute concessions such as increased state and local tax deductions, has pushed markets to cautiously rally despite concerns over the bill’s impact on the federal deficit. Treasury yields eased slightly from recent highs, soothing some pressure on equities after Moody’s downgraded the U.S. credit rating, citing rising debt levels.
Market Movers:
- Tesla (TSLA) +2.4%: Shares rallied as CEO Elon Musk refocused on the company following his government efficiency stint. Investor enthusiasm over Tesla’s long-term growth prospects and ongoing electric vehicle demand helped push the stock higher despite broader market volatility.
- Nvidia (NVDA) +1.9%: The AI chip leader benefited from eased trade restrictions and upcoming earnings expectations. Nvidia’s strong positioning in artificial intelligence and data center markets is keeping investors bullish ahead of its May 28 earnings release.
- Hinge Health (HNGE) +17.3%: The digital physical therapy platform debuted on the NYSE at $32 per share, rising quickly to $39. The company’s IPO signals renewed investor appetite for healthcare technology, especially digital health solutions that have grown since the pandemic.
- Bitcoin (BTC-USD) +4.4%: Bitcoin surged to an all-time high above $111,000 amid rising investor demand for alternatives to traditional fiat currencies. The approval of the tax bill, which signals expanded government deficits, has fueled interest in cryptocurrencies as a hedge against currency depreciation.
- Novo Nordisk (NVO) +0.4%: The pharmaceutical giant offered a one-month price discount on its weight-loss drug Wegovy to counteract compounded copycat versions flooding the market. This strategy aims to retain market share and reassure patients seeking FDA-approved medication.
Bond Yields and Market Sentiment
The 30-year Treasury yield retreated slightly below 5.1%, down from levels not seen since the 2008 financial crisis, while the benchmark 10-year yield eased to approximately 4.55%. This decline in long-dated yields helped ease borrowing costs for businesses and consumers, supporting a positive tone in equity markets.
Investors remain wary, however, as Moody’s downgrade of the U.S. credit rating underscored risks from ballooning deficits. The downgrade has sparked a reassessment of U.S. fiscal health and its implications for future government borrowing costs. Mortgage rates have risen in tandem, with the average 30-year fixed rate climbing to 6.86%, adding pressure on the housing market.
Economic Activity Rebounds Amid Tariff Effects
The latest flash data from S&P Global’s U.S. composite Purchasing Managers’ Index (PMI) showed a rebound to 52.1 in May, up from 50.6 in April, signaling growth in both manufacturing and services sectors. The tariff rollback under the Trump administration looks to have improved business confidence, contributing to this uptick.
However, supply chain issues remain a challenge, with tariffs pushing prices higher and causing delays. Companies are increasingly passing tariff-related costs onto consumers, adding to inflationary pressures even as output expands. These dynamics will be critical to monitor as the economic recovery continues.
The Dollar’s Struggles and Global Currency Shifts
The U.S. dollar has weakened considerably this year, losing over 8% against a basket of major currencies. Investor skepticism about America’s fiscal trajectory has prompted capital flows toward undervalued currencies in Europe and Asia, which are benefiting from foreign stimulus measures and more attractive valuations.
This dollar softness further underscores growing concerns over U.S. debt levels and fiscal policy. The dollar’s status as a global safe haven is being challenged, with strategists warning investors to rethink traditional hedges amid changing macroeconomic conditions.
Looking Ahead
Markets will remain focused on the unfolding implications of the Trump tax bill as it moves through the legislative process. Investors will watch bond yields closely for signs of sustained pressure, while corporate earnings reports in the coming weeks, especially from key tech players like Nvidia, will provide insight into growth sustainability.
Additionally, the trajectory of inflation and interest rates, alongside global currency movements, will shape risk sentiment. Bitcoin and other cryptocurrencies may continue to attract attention as alternative stores of value amid mounting fiscal concerns. Overall, market participants are navigating a complex environment balancing fiscal expansion, rising debt, and economic recovery signals.