The U.S. financial markets were highly volatile this Thursday. The three major stock indexes ended the day mixed, with the S&P 500 index declining for the third consecutive day. The bond market experienced another wave of sell-offs due to fiscal concerns. Market investors are significantly worried about the large-scale tax and spending bill pushed by Trump. Although it narrowly passed the House of Representatives, it may exacerbate the already severe fiscal deficit and shake market confidence.
Mixed Stock Performance, Tech Sector Bolsters Market
By the close of Thursday's U.S. stock market, the Dow Jones Industrial Average was nearly flat at 41,859.09 points. The S&P 500 dipped slightly by 0.04%, closing at 5,842.01 points, marking its third consecutive day of decline. The Nasdaq index rose by 0.28%, closing at 18,925.73 points. Large tech stocks remained relatively strong, with Tesla up nearly 2%, Google and Amazon both gaining over 1%, while Apple slightly declined by 0.36%.
The semiconductor sector was generally under pressure, with the Philadelphia Semiconductor Index dropping 0.57%. Companies like NXP, ON Semiconductor, and Qualcomm led the declines, but Marvell Technology and TSMC bucked the trend, rising over 2%.
Chinese stocks listed in the U.S. retreated overall, with the Nasdaq Golden Dragon China Index down 1.18%. Xpeng saw a sharp decline of over 7%, whereas Pony.ai rose nearly 20% against the trend.
Intensified Bond Market Sell-off, 30-Year Treasury Yield Hits Seven-Month High
The bond market showed clear signs of tension. The yield on 30-year U.S. Treasury bonds surged to 5.15% during the session, hitting a new high since October 2023, reflecting market caution over surging government debt. The recent weak demand in the 20-year Treasury auction indicates investors' lack of confidence in long-term fiscal sustainability.
Federal Reserve’s Waller: Tariffs Impact Rate Cut Decisions
Christopher Waller, a member of the Federal Reserve Board of Governors, stated in a media interview that if the U.S. government maintains tariffs of about 10% on major trading partners, and related policies are implemented by July, the Fed might start a rate-cutting cycle in the latter half of 2025. He believes that current economic data remains strong, and inflation hasn't been significantly impacted by tariffs yet. However, further tariff hikes would severely limit the scope for monetary policy actions.
He also specifically noted that the Federal Reserve would not participate in primary Treasury auctions and mentioned market concerns over the Republican tax reform, saying, "The market originally expected more fiscal restraint, but reality is clearly the opposite."
Tax Reform Bill Passes, Debt Crisis Warning Sounds
On the 22nd, the U.S. House of Representatives narrowly approved the large-scale tax and spending bill proposed by the Trump administration. This bill is expected to add $3.8 trillion to federal debt over the next decade, further inflating the current debt size of $36.2 trillion.
The Committee for a Responsible Federal Budget strongly criticized the bill, calling it "a blatant disregard for fiscal responsibility." The agency pointed out that if related tax cuts are extended, billions more in debt could be added, potentially creating an unmanageable "fiscal cliff" that severely impacts the government's long-term financial stability.
Gold Rises on Safe-Haven Demand, Surpasses $3,300
Amid debt risks and bond market turbulence, safe-haven sentiment boosted gold prices. Spot gold surpassed $3,300 per ounce with a significant short-term rebound, reflecting further market concerns about dollar credit and U.S. bond risks.
Conclusion:
Although the Federal Reserve hinted at possible future rate cuts, the current market focus has shifted to the debt issues stemming from Trump’s tax reform bill. With rising Treasury yields, stock market fluctuations, and a rebound in gold, uncertainty in U.S. fiscal policy is becoming a major variable in financial markets. Future developments will need close attention regarding the Senate's further review of the bill.
