The New York Stock Exchange closed on the 22nd (local time) mixed but steady, despite a decline in U.S. Treasury yields and the passage of the Republican tax cut proposal in the House. A selling spree in the latter half of the session retracted much of the earlier gains.
On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell by 1.35 points (0.00%) to 41,859.09. The Standard & Poor's (S&P) 500 index fell by 2.60 points (0.04%) to 5,842.01, while the Nasdaq composite index rose by 53.09 points (0.28%) to close at 18,925.73.
The stock market showed movements linked to the Treasury market. The tax cut bill pushed by President Donald Trump passed the House, alleviating some policy uncertainty, and as a result, Treasury yields generally fell, boosting the stock indices. However, selling pressure emerged with 30 minutes remaining in the session, negating most of the gains.
The tax cut proposal included reductions in personal and corporate taxes as well as an extension of tax credits. This measure is primarily aimed at extending contents introduced during the first Trump administration in 2017. The Congressional Budget Office (CBO) projected that if this bill is finalized, the federal budget deficit will increase by $3.8 trillion over the next 10 years.
The bond market welcomed the passage of the tax cut proposal in the House as a resolution of uncertainty, leading to an influx of bargain buying, which in turn expanded the decline in Treasury yields. The dollar index showed strength by recovering above 100 during the session.
However, in the final moments of the session, profit-taking selling emerged, causing indices to reverse course. The S&P 500 and Dow indices, which had risen by 0.5%, turned to decline, while the Nasdaq index also reduced its gains by more than 1%, moving to a strong steady state.
Jed Ellerbrook, a manager at Agent Capital, analyzed, "The tax cut proposal has a stimulating effect on the economy in the short term, but in the long term, it could increase the deficit and burden the market." Scott Pyke, a manager at Income Research, noted, "It is difficult to see the Treasury yields reaching their peak, but there is a somewhat revitalized atmosphere for buying."
By sector, consumer discretionary, technology, and communication services showed strength, while utilities fell by 1.4%. Major tech stocks known as the "Magnificent Seven," excluding Apple, all rose. Apple has continued to trend downward after losing its position as the second-largest company by market capitalization to Nvidia.
Google rose by more than 1% on this day as enthusiasm continued for the announcement of its AI-based new product made the previous day. In contrast, solar stocks plummeted across the board due to the effects of the passage of the tax cut proposal. Sunrun fell by 37%, SolarEdge by 25%, and First Solar by 4%.
Corporate earnings announcements also impacted the market. Advance Auto Parts surged by 57% due to strong first-quarter earnings, and cloud analytics company Snowflake rose by 13% thanks to positive first-quarter results.
Christopher Waller, a member of the Federal Reserve, mentioned in an interview on this day that if tariffs remain at around 10%, a rate cut could be possible in the second half of the year. He said, "If tariffs are low and implementation is completed by July, the Federal Reserve could move towards a rate cut in the second half."
May economic indicators in the U.S. showed a mixed picture. S&P Global announced that the preliminary Purchasing Managers’ Index (PMI) for both services and manufacturing came in at 52.3, the highest in two months. However, employment showed signs of slowing, and prices rose to their highest level since the pandemic.
The U.S. Department of Labor announced that the number of new unemployment claims for the previous week dropped by 2,000 to 227,000, which was below the market expectation of 230,000.
According to CME FedWatch, the probability of a rate freeze in July in the federal funds futures market is at 73.1%, a slight increase from the previous day. The Chicago Board Options Exchange (CBOE) volatility index (VIX) fell by 0.59 points (2.83%) to record 20.28.