For some investors, the House's approval signaled a faint glimmer of stability-proof, perhaps, that a government riven by ideological division could still produce policy. Yet this bill also raises concerns among investors that the US is sprinting headlong into fiscal recklessness under the guise of populist prosperity. The bill is a mix of tax breaks and spending hikes, including generous tax exemptions on service-sector and another jolt of military spending.

In premarket trading this morning, Futures dipped slightly, from - 0.4% for the Dow to -0.1% for the Nasdaq. 

Meanwhile, Wall Street has picked its winners. Snowflake, the data cloud darling, soared nearly 10% on robust earnings and a lifted forecast. Alphabet added 1.5%, buoyed by AI enthusiasm. Urban Outfitters rocketed 18% after a surprise earnings jump. But not everyone shared in the spoils. CVS and Humana were battered by fresh regulatory scrutiny over Medicare Advantage plans.

Yesterday, Wall Street ended up getting caught by the bond patrol for the second time in less than two months. After a long series of modest and mostly bullish fluctuations, the major indices fell more sharply, with the S&P 500 dropping 1.61% at the close. This is its biggest decline in a month (the previous one was on April 21st, -2.36%). The Russell 2000, the US small-cap index, fell 2.8%.

This is significant and reflects investors' concerns about the least robust segment of the market. When the clouds gather, large companies, which are better capitalized and have a wider range of financing solutions at their disposal, are less vulnerable than small companies.

This skepticism is no longer confined to think tanks and budget hawks. The US president is asking Americans to accept immediate pain in exchange for a promise of future prosperity. But investors are not buying it. Financiers sold bonds, which automatically pushed up yields, according to the principle of communicating vessels. The yield on 10-year US debt, which had fallen after the temporary abandonment of reciprocal tariffs, has risen by more than 10% since the beginning of May.

Yesterday, another event dampened the mood and increased losses on Wall Street: weak demand for a 20-year US Treasury auction. This is a negative signal that investors have less appetite for US debt, which is perceived as riskier than before. They may therefore demand higher returns in future to absorb investments. This renewed bond market tension was accompanied by a statement from the highly respected CEO of JPMorgan, Jamie Dimon, who warned for the second time in a week about the risk of stagflation in the United States.

When equities collapsed in early April due to the onset of a fire on the debt market, it was Dimon who went to the White House to preach the gospel and who probably helped raise awareness of the seriousness of the situation. It is a curious analogy, then, just six weeks later, like a bad remake: the bond market is tense, and Dimon is at the microphone.

Republican leaders still have to vote twice before sending the bill to the Senate, where it will be debated at length. It remains to be seen whether the bill's progress through the regulatory maze will calm the markets. On the one hand, a budget impasse would be seen as a sign of political tension. On the other hand, passing the bill would mean accepting higher debt, which would complicate the management of the US economy.

In other news, Donald Trump has reportedly told European leaders in private that Vladimir Putin is not ready to end the war, according to the Wall Street Journal. The EU has presented a revised trade proposal to the United States in order to revitalise negotiations with the White House. In a week with few macroeconomic indicators and with investors seemingly paying little attention to Fed speeches, today's data will likely be closely scrutinized, particularly the PMI activity indicators (eurozone and US).

In Asia-Pacific, Japan continued its decline of 0.9%, while Hong Kong fell 1% and South Korea lost 1.2%. India and Taiwan (-0.7%) and Australia (-0.4%) also followed the downward trend initiated by the United States. Leading indicators are bearish in Europe.

Today's economic highlights:

On today's agenda: Japan's PMIs followed by machine tool orders; in France, business confidence and HCOB PMIs; in Germany, HCOB PMIs and IFO indices; for the eurozone, HCOB PMIs; in the United Kingdom, S&P Global PMIs; in the United States, the Chicago Fed National Activity Index, new unemployment claims, S&P Global PMIs, and existing home sales. See the full calendar here.

  • Dollar index: 99,830
  • Gold: $3,310
  • Crude Oil (BRENT): $63.91 (WTI) $60.60
  • United States 10 years: 4.61%
  • BITCOIN: $111,480

In corporate news:

  • Johnson Matthey to sell Catalyst Technologies to Honeywell for over £1.5 billion.
  • Nike is preparing to raise prices next week and plans to resume sales on Amazon.
  • UnitedHealth fell yesterday after rumors of payments to nursing homes to reduce transfers to hospitals.
  • Boeing is ramping up production of the B737 thanks to improvements in quality and safety culture.
  • Google will integrate advertising into its AI-enhanced search engine.
  • Walmart plans job cuts as part of a restructuring aimed at simplifying its operations.
  • OpenAI is taking on connected devices with the help of Apple's legendary designer.
  • Goldman Sachs consolidates Asian investment banking under Iain Drayton.
  • AT&T acquired Lumen's mass markets fiber business for $5.75 billion.

Analyst Recommendations:

  • Expand Energy Corporation: Bernstein upgrades to outperform from dropped coverage with a target price of USD 150.
  • Planet Fitness, Inc.: Stifel upgrades to buy from hold with a price target raised from USD 82 to USD 120.
  • Target Corporation: Telsey Advisory Group downgrades to market perform from outperform with a price target reduced from USD 130 to USD 110.
  • United Rentals, Inc.: KeyBanc Capital Markets upgrades to overweight from sector weight with a target price of USD 865.
  • W.w. Grainger, Inc.: Baptista Research downgrades to underperform from hold with a target price raised from USD 1135 to USD 1153.
  • Fastenal Company: Morgan Stanley maintains its market weight recommendation and reduces the target price from 76 to USD 38.
  • Moderna, Inc.: JP Morgan maintains its underweight recommendation and reduces the target price from 33 to USD 26.
  • Snowflake Inc.: Cantor Fitzgerald maintains its overweight recommendation and raises the target price from USD 183 to USD 242.
  • Ulta Beauty, Inc.: Jefferies maintains its hold recommendation with a price target raised from USD 334 to USD 410.
  • Zscaler, Inc.: Jefferies maintains its buy recommendation and raises the target price from USD 240 to USD 295.