The S&P 500 edged slightly lower on Thursday as financial markets digested the narrow passage of President Donald Trump’s sweeping tax bill in the House of Representatives.
The legislation, which combines significant tax cuts with reductions to social safety net programmes, advanced after a tense, party-line vote, marking a major political victory for the Republican leadership. However, the bill’s potential to substantially increase the national debt has left investors cautious and markets volatile.
The House’s approval came after a marathon 21-hour session of negotiations and amendments aimed at uniting moderate and conservative factions within the Republican Party.
The final version of the bill, exceeding 1,000 pages, was pushed through with last-minute concessions, including an expanded deduction for state and local taxes to win over dissenters. Speaker Mike Johnson underscored the urgency of the legislation, aiming to have it signed into law by July 4.
Despite the legislative breakthrough, Wall Street’s reaction was subdued. The S&P 500 slipped by 0.1%, while the Dow Jones Industrial Average dropped 0.3%. The tech-heavy Nasdaq Composite managed a modest gain of 0.1%, reflecting mixed sentiment as investors weighed the bill’s economic implications.
Wednesday had already seen the steepest single-day declines in a month for all three major indices, triggered by a surge in Treasury yields and mounting concerns over the country’s fiscal trajectory.
The nonpartisan Congressional Budget Office estimates that the tax-and-spending package could add $3.8 trillion to the existing $36 trillion U.S. deficit over the next decade. This prospect has rattled financial markets, with Moody’s recent credit rating downgrade explicitly citing the bill as a factor. Yields on 30-year U.S. Treasury bonds surged past 5.1%, approaching levels not seen since the financial crisis, as investors demanded greater compensation for perceived fiscal risk.
While the bill now moves to the Senate under budget reconciliation rules—requiring only a simple majority for passage—several Republican senators have already called for significant revisions. The uncertainty surrounding the final shape of the legislation, combined with persistent debt fears, continues to keep traders on edge.
Adding to the day’s volatility, bitcoin soared past $111,000 for the first time, buoyed by rising institutional demand as investors seek alternatives amid macroeconomic uncertainty. As the legislative process unfolds, all eyes remain on Washington and Wall Street for signals on the future direction of U.S. fiscal policy and its impact on global markets.
