Dow Jones Surges 0.77% on Trump Budget Bill Passage, S&P 500 and Nasdaq Fall

The U.S. stock market saw a mixed performance on Tuesday, June 1, with the Dow Jones Industrial Average surging by 340 points, or 0.77%. This significant gain was driven by the Senate's passage of President Trump's budget bill, which provided a boost to investor confidence. The budget bill, which includes trillions in tax cuts and reductions in spending on Medicaid, food stamps, and clean energy, passed the Senate with a vote of 51-50, with Vice President JD Vance breaking the tie. The bill is expected to add an estimated $3.3 trillion to the nation’s deficit, leading to dissent from Republican Senators Rand Paul, Susan Collins, and Thom Tillis.

However, the S&P 500 and the Nasdaq Composite experienced declines. The S&P 500 retreated from its record highs, losing 0.11%, while the tech-heavy Nasdaq Composite fell 0.61%. This downturn was largely attributed to the significant drop in Tesla's stock price, which fell by 8% on market open. Tesla's stock price plummeted from $320 to $295 before recovering to $303. The decline was sparked by a feud between Tesla CEO Elon Musk and President Trump, with Musk criticizing the budget bill as "utterly insane and destructive." In response, Trump threatened to investigate Musk's contracts with the U.S. government, including those related to SpaceX.

Traders were primarily focused on the progress of trade talks and the implications of Trump's budget bill. The bill's cuts to clean energy and tax breaks for the fossil fuel industry drew criticism from Musk, who has been a major beneficiary of U.S. subsidies for clean energy, particularly for electric vehicles produced by Tesla. The market's reaction to Musk's comments and Trump's threats highlights the sensitivity of investors to geopolitical risks and the potential impact of political statements on corporate operations. The decline in Tesla's stock price had a notable impact on the S&P 500 and the Nasdaq Composite, reflecting the significant influence of major tech companies on these indices.