U.S. stocks markets closed mixed after a choppy session. Market participants remained concerned that the proposed tax-cut bill of President Trump will further worsen U.S. fiscal deficit. Spike in yields of long-dated U.S. sovereign bonds also unnerved investors. The Dow and the S&P 500 ended in negative territory while the Nasdaq Composite managed to finished in positive zone.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 1.35 points to close at 41,859.09. Notably, 15 components of the 30-stock index ended in negative territory and 15 finished in positive zone. The tech-heavy Nasdaq Composite finished at 18,925.73, gaining 0.3% due to strong performance of technology bigwigs.

However, the major gainer of the tech-laden index was GRAIL Inc. GRAL. The stock price of the biotech firm was up 3.5%. GRAIL currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 was down 2.6 points to finish at 5,842.01. Nine broad sectors of the broad-market index ended in negative territory while two in positive zone. The Consumer Discretionary Select Sector SPDR (XLY) rose 0.4% while the Health Care Select Sector SPDR (XLV) fell 0.8%.

The fear-gauge CBOE Volatility Index (VIX) was down 2.8% to 20.28. A total of 16.09 billion shares were traded on Thursday, lower than the last 20-session average of 17.56 billion. The S&P 500 posted four new 52-week highs and nine new 52-week lows while the Nasdaq Composite recorded 49 new 52-week highs and 109 new 52-week lows.

House Clears SALT Bill

Yields on long-dated U.S. government securities spiked after republican-controlled House passed the state and local taxes (SALT) bill of the Trump administration on a water-thin majority. The 2017 Republican tax bill capped SALT deductions at $10,000 and the current tax bill has raised the limit to $40,000. Earlier, House republicans from Democrat-controlled states raised questions on the tax deduction allowed for SALT on federal income tax returns.

A rough estimate has shown that the proposed tax cut will generate around $3.8 trillion extra burden on the U.S. government exchequer. The United States is currently facing a gigantic $36.2 trillion fiscal deficit. Given the concerns of the U.S. fiscal prudence, on May 21, the auction for 20-Year U.S. Treasury Notes had a lackluster demand from investors. Market participants shorted long-dated government securities.

As a result, yield on the 30-Year U.S. Treasury Note last traded around 5.161%, touching the highest level going back to October 2023. Similarly, the yield on the benchmark 10-Year U.S. Treasury Note spiked to 4.59%, its highest level since mid-February.

Story Continues

On May 16, Moody’s Investor Services downgraded the U.S. sovereign credit rating by one notch to Aa1 from Aaa. Moody’s is the third major rating agency after the S&P 500 Global and Fitch to downgrade the U.S. sovereign credit rating.

The rating agency cited the growing burden of financing the federal government’s outstanding budget deficit of a mammoth $36.2 trillion and the rising cost of rolling over existing debt under the high-interest rate regime.

Economic Data

The Department of Labor reported that initial claims decreased 2,000 to 227,000 for the week ended May 17, lower-than the consensus estimate of 230,000. Continuing claims (those who have already received government aids and reported a week behind) increased 36,000 to 1.903 million. Previous week’s data was revised downward by 14,000 to 1.867 million.

The National Association of REALTORS reported that existing home sales in April came in at 4 million units compared with the consensus estimate of 4.18 million and March’s metric of 4.02 million units.

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