Trump Pressures Republicans to Pass Tax Cut Bill
Treasury Yields Soar on Worsening Fiscal Deficit Outlook
Target Drops 6.5% After Lowering Sales Forecast Due to Tariffs
All three major indices on the New York Stock Exchange fell simultaneously on May 21 (local time). Concerns over a worsening fiscal deficit intensified after President Donald Trump pressured the Republican Party to pass a tax cut bill, and the rise in U.S. Treasury yields further weighed on investor sentiment. The yield on the 10-year U.S. Treasury once again surpassed 4.5%, and the 30-year yield broke above 5%, putting downward pressure on the market.
As of 9:43 a.m. on the same day at the New York Stock Exchange, the Dow Jones Industrial Average, which focuses on blue-chip stocks, was down 363.71 points (0.85%) from the previous trading day at 42,313.53. The S&P 500 index, which tracks large-cap stocks, was down 30.82 points (0.52%) at 5,909.64, while the tech-heavy Nasdaq index was trading at 19,063.22, down 79.49 points (0.42%).
The market is closely watching whether the "mega bill," a major tax cut plan that is a key campaign pledge of President Trump, will pass Congress. President Trump pressured the passage of the bill by warning some Republican lawmakers who opposed it that they would be "ousted" in the next election. Currently, the Republican Party holds 220 seats in the House of Representatives, narrowly ahead of the Democratic Party's 213 seats, so just a few defections within the party could jeopardize the bill's passage. In this context, House Speaker Mike Johnson, a Republican, stated that internal disagreements within the party had narrowed and that the bill would be brought back to the floor for a vote on this day.
As global credit rating agency Moody's downgraded the U.S. sovereign credit rating by one notch from the highest level, citing federal government debt issues, concerns over a worsening fiscal deficit and rising national debt have spread as President Trump pushes ahead with the tax cut plan. Major institutions such as the Congressional Budget Office (CBO) and Moody's estimate that if this bill passes, U.S. tax revenues will decrease by $3 to $4 trillion.
Amid forecasts of a worsening fiscal deficit, U.S. Treasury yields are rising, especially for long-term bonds. The yield on the benchmark 10-year U.S. Treasury is currently at 4.54%, and the 30-year U.S. Treasury yield is at 5.02%, both up 6 basis points (1bp=0.01 percentage point) from the previous day. When the deficit grows, the government has to issue more Treasury bonds to cover it. If the supply of Treasury bonds in the market increases and there are not enough investors to absorb them, the government will have to offer higher yields.
Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management, commented on bond yields, saying, "The trend going forward will clearly be higher," and added, "The key issue is skepticism about fiscal matters. This is not just a U.S. issue, but a global one."
Despite the trade agreement between the United States and China, significant uncertainty remains over tariffs, and concerns over stagflation?rising prices amid economic stagnation?continue to be a source of instability.
Kristian Kerr, chief macroeconomic strategist at LPL Financial, noted, "The stock market rebound over the past month has been remarkable in both speed and scale," but added, "While one might want to interpret this strong rally as a clear sign that risks have subsided, the reality is that a great deal of uncertainty remains."
By stock, major U.S. retailer Target is down 6.52%. This is due to first-quarter sales falling short of expectations and the company's downward revision of its annual sales outlook, which is attributed to consumer backlash following the removal of tariffs and DEI (Diversity, Equity, and Inclusion) policies. Walmart and Home Depot are down 0.64% and 0.63%, respectively. Apple is down 0.88%, and Microsoft (MS) is down 0.56%.
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