Traders work on the floor of the New York Stock Exchange on May 21, 2025 in New York City.
Spencer Platt | Getty Images
Stocks were little changed on Thursday, as investors tried to shake off fears of rising rates and worries about a ballooning U.S. deficit. The 30-year Treasury yield hit its highest since October 2023 on Thursday as lawmakers passed a bill that investors fear could worsen the U.S. deficit.
The Dow Jones Industrial Average shed 27 points, or less than 0.1%. The S&P 500 was marginally lower, while the Nasdaq Composite advanced 0.4%.
In a party line vote early Thursday, House members approved the bill that includes lower taxes and additional military spending. The bill — which now goes to the Senate — could increase the U.S. government’s debt by trillions and raise the deficit at a time when fears of a flare-up in inflation due to Trump tariffs are already weighing on bond prices and boosting yields. The Congressional Budget Office puts the price tag for bill at nearly $4 trillion.
“Short term, the tax bill is good for the economy. It is going to boost GDP growth in 2026. It reduces taxes for lots of people, it increases spending, especially on defense, and so those things are stimulative to the economy and are going to boost GDP growth,” said Jed Ellerbroek, portfolio manager at Argent Capital Management, in an interview with CNBC.
He continued: “Longer term, yeah, it blows out the deficit. Long term, for the bad market, it’s bad news. Yields are going higher, which means prices are going down because Treasuries are becoming incrementally less appealing and trustworthy, as our budget deficit stays extremely high for a very long period of time with no signs of it going back to normal.”
The 30-year Treasury bond yield on Thursday traded at levels not seen since 2023, around 5.14%, before retreating later in the session. The benchmark 10-year Treasury note yield also backed off its high of the day. The increase in long-term rates, which are benchmarks for consumer loans, could pressure an economy already feeling the weight of Trump’s recently implemented universal tariffs.
The blue-chip Dow on Wednesday slid more than 800 points, while the S&P 500 finished the day 1.6% lower. A poor auction for 20-year Treasury debt helped fuel the spike in yields and the stock drop on Wednesday. Investors’ appetite for continuing to buy Treasuries in order to fund the U.S. deficit could be lagging and could worsen if this bill passes the Senate, becoming law. Yields would need to rise if bond demand continues to fade.
