U.S. Stocks Rise as Trump's Tax Bill Passes House, Bond Yields Surge

On the morning of May 23, Beijing time, U.S. stocks maintained their upward momentum during midday trading, with the market continuing to focus on Trump's tax reform bill. The bill narrowly passed the House of Representatives but investors are concerned that it could exacerbate the fiscal deficit. U.S. long-term bonds came under pressure again, with the 30-year Treasury yield reaching its highest level since October 2023.

The Dow Jones Industrial Average rose 113.54 points, or 0.27%, to 41,973.98. The Nasdaq Composite Index gained 138.99 points, or 0.74%, to 19,011.63. The S&P 500 Index increased by 15.24 points, or 0.26%, to 5,859.85.

During the early morning vote on Thursday, the U.S. House of Representatives passed a bill that includes tax cuts and increased military spending. Against the backdrop of concerns about inflation resurgence due to Trump's tariff policies, which have already put pressure on bond prices and pushed up yields, the bill, if passed by the Senate, could add tens of billions of dollars to the U.S. government's debt and widen the deficit.

The Congressional Budget Office estimated the cost of the bill to be nearly 40 billion dollars. Jed Ellerbroek, portfolio manager at Argent Capital Management, said, "In the short term, this tax bill is beneficial to the economy. It will drive GDP growth by 2026, provide tax relief for many taxpayers, and increase spending in areas such as national defense, all of which have economic stimulus effects and will promote GDP growth."

He further analyzed, "However, in the long term, the bill will lead to a surge in the fiscal deficit. This is bad news for the bond market. As the budget deficit remains high for a long period and shows no signs of returning to normal, the attractiveness and credibility of Treasuries will gradually decline, and yields will rise accordingly, which means bond prices will fall."

Trump's tax reform bill narrowly passed the House of Representatives. The bill, a signature initiative of U.S. President Trump, passed the House of Representatives on Thursday morning with a narrow margin, advancing a massive plan worth tens of billions of dollars. The plan will avoid a year-end tax increase but at the cost of a heavier U.S. debt burden.

The bill is now under review by the Senate, with some Republican lawmakers calling for significant changes. Lawmakers plan to vote on the bill by August at the latest. The bill also includes raising the U.S. debt ceiling by 40 billion dollars, or the U.S. could face a debt default as early as August or September, according to Treasury Department projections, making the bill's passage more urgent.

The House vote was 215 in favor, 214 against, and 1 abstention, a result that was met with cheers from Republican lawmakers. Earlier, Trump launched a fierce offensive, visiting the Capitol to rally Republicans, and communicating with lawmakers by phone until late at night, summoning those who disagreed to the Oval Office.

The Office of Management and Budget issued a statement saying that any Republican lawmaker who does not support the bill is considered to have committed "ultimate betrayal."

Economic data showed that the number of Americans filing for unemployment benefits fell last week, indicating that the U.S. economy maintained steady job growth in May. The U.S. Department of Labor reported that the number of people filing for unemployment benefits for the week ending May 17 fell by 2,000 to 227,000, seasonally adjusted. Economists had previously forecast that the number of initial jobless claims for the week would be 230,000. They expect the number of initial jobless claims to rise to the upper limit of the 20.5 million to 24.3 million range in the coming weeks, primarily due to the difficulty of adjusting data based on seasonal fluctuations.

Analysts said this does not mean that the labor market situation has undergone a major change. Despite the increasing economic uncertainty caused by Trump's changing trade policies, employers are generally reluctant to lay off workers. However, economists expect layoffs to increase in the second half of 2025 due to government import tariffs, supply chain disruptions, and inflation.

Another data point showed that the number of existing home sales contracts signed in April was 4 million, below the expected 4.1 million and the previous value of 4.02 million.

Dan Ives, managing director of Wedbush Securities and a bull on Tesla, said in an interview this week that the electric vehicle giant may be entering a "golden age," especially as its market value is expected to reach 2 trillion dollars due to developments in autonomous driving and robotics. One of the core arguments supporting Ives' view is the upcoming launch of the robotaxi. He previously said that Tesla's launch of the robotaxi in Austin is a "turning point" for the company. Ives predicts that through this plan, Tesla will surpass Waymo within the next year.

Jensen Huang, CEO of NVIDIA, said at the Taipei International Computer Show on Wednesday that NVIDIA's market share in China has fallen from 95% four years ago to the current 50%. Regarding the AI regulations imposed by the U.S., Huang once again bluntly stated that the U.S. strategy is "completely wrong," and "if the goal of the regulatory order is to ensure that the U.S. maintains its leadership, then based on the current regulations, this will actually cause us to lose our leadership."

Huang emphasized that China's development in the field of AI is excellent. "Local companies are very talented and determined, and export controls have given them spirit, vitality, and government support, allowing them to accelerate their development." Huang also said that currently, more than half of the world's AI researchers are in China. The U.S. control of AI chip exports to China has objectively forced these researchers to use China's self-developed technology.