Stocks dip, treasury yields gain, investors weigh US fiscal concerns

New Straits Times

21-05-2025

NEW YORK: Major stock indexes eased while longer-dated US Treasury yields inched higher, with investors focused on US fiscal concerns as Congress debated a bill for sweeping tax cuts.
The S&P 500 snapped a six-day streak of gains.
US President Donald Trump pushed his fellow Republicans in Congress to unite behind the bill, but struggled to convince a handful of holdouts on the package, which would extend the 2017 tax cuts from his first term, among other things.
Investors worry that the bill will lead to the US budget deficit growing at a faster pace than previously expected. Moody's Investors Service downgraded the US credit rating late on Friday, fanning concerns about the country's debt load.
"With the Republican bill still up in the air, there's just enough uncertainty to lead people to be a little bit more cautious and use this recent rally maybe to trim a little bit of their (stock) portfolio," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
The Dow Jones Industrial Average fell 114.83 points, or 0.27 per cent, to 42,677.24. The S&P 500 dropped 23.14 points, or 0.39 per cent, to 5,940.46 and the Nasdaq Composite slid 72.75 points, or 0.38 per cent, to 19,142.71.
Investors are also reassessing the recent rally and considering the potential fallout from the shifts in US tariff policy, Meckler said.
Home Depot shares ended down 0.6 per cent, although the home improvement retailer beat Wall Street estimates for first-quarter sales.
MSCI's gauge of stocks across the globe fell 0.77 points, or 0.09 per cent, to 881.62.
European stocks closed near nine-week highs, with utilities and telecom firms leading gains. The pan-European STOXX 600 index rose 0.73 per cent.
Longer-dated US Treasury yields edged higher amid the US fiscal concerns.
The benchmark US 10-year note yield rose 0.2 basis points to 4.477 per cent. The 30-year bond yield gained 2.3 basis points at 4.965 per cent. On Monday, it touched 5.037 per cent in intraday trading, the highest since November 2023.
In a sign of broader market nervousness, Japanese super-long government bond yields soared to all-time highs on Tuesday, precipitated by a poor auction of 20-year securities.
The Japanese 20-year yield jumped as much as 15 bps to 2.555 per cent, its highest since 2000, and the 30-year yield hit a record high of 3.14 per cent.
The dollar declined again, weighed down in part by more cautious remarks about the economy by Federal Reserve officials.
Among them, St. Louis Federal Reserve Bank President Alberto Musalem said despite the recent easing in US-China trade tensions, the labor market looks likely to weaken and prices will head higher.
Traders expect at least two 25-basis-point rate cuts from the Fed by the end of 2025.
The dollar fell against the yen to a roughly two-week low of 144.095 yen, before trading down 0.2 per cent at 144.495 yen, sliding in five of the last six sessions.
The Aussie dollar was last down 0.6 per cent at US$0.6416 after the Reserve Bank of Australia cut benchmark interest rates by 25 basis points and left the door open to further easing in the months ahead.
In Canada, the annual inflation rate eased to 1.7 per cent in April, above economists' expectations for a 1.6 per cent gain.
Oil prices were little changed amid uncertainty in US-Iran negotiations and Russia-Ukraine peace talks.
Brent futures slid 16 cents, or 0.2 per cent, to settle at US$65.38 a barrel, while US West Texas Intermediate (WTI) crude eased 13 cents, or 0.2 per cent, to settle at US$62.56.
Gold prices rose more than one per cent as the dollar weakened further. Spot gold rose 1.86 per cent to US$3,288.96 an ounce.