S&P500 Forecast: SPX slips, treasury yields rise as Trump's bill is passed

US futures

Dow futures -0.16% at 41780

S&P futures -0.14% at 5830

Nasdaq futures -0.1% at 21074

In Europe

FTSE -0.96% at 8701

DAX -0.91% at 23983

• The mood is cautious after Trump’s tax cut bill is passed
• Treasury yields spike on worries over debt levels
• A weak 20-year treasury auction yesterday highlights concerns
• Oil falls on concerns over increased OPEC+ supply

Stocks fall as Trump’s tax cut bill is passed

U.S. stocks are falling but have recovered from the lows as investors weigh up the impact of Trump's Big Beautiful Bill ahead of business activity data later in the session.

Trump's signature tax bill narrowly passed a House vote this morning, advancing the package. It will avert a year-end tax increase at the expense of increasing U.S. debt. The bill now heads to the Senate. The bill includes a $4 trillion increase in the US debt ceiling, which would otherwise lead to a default at the end of summer, meaning there is some urgency to it being approved.

Rising deficits driven by tax cuts often unnerve the bond market. Investors dump bonds in a sign that investors are pushing back against President Donald Trump's tax plan cut. The yields on the 30-year treasury rose as high as 5.1%, just shy of a 2-decade peak, sparking declines in stocks.

Meanwhile, data show that US jobless claims are at the lowest level in four weeks, adding to evidence that the US job market remains resilient in the face of growing uncertainty from trade policies. Initial claims fell by 2k to 227k, roughly in line with forecasts in the week ending May 17th.

U.S. business activity data, as measured by PMI figures, is due later

Corporate news

Nike is rising 1% after the company said it would resume selling on Amazon. Sales on Amazon had previously been highly restricted after the brand stopped direct sales through the e-commerce site in 2019.

Urban Outfitters is jumping 17% after posting earnings of $1.16 per share, ahead of the $0.84 forecast. Revenue was $1.33 billion, above the 1.29 billion Wall Street had expected.

Snowflake is up 8%. The cloud-based data storage company posted earnings of $0.24, ahead of the $0.21 cents forecast.

Zoom Communications is falling despite Q1 earnings beating expectations. Zoom posted EPS of 143 a share ahead of the 131 forecast, whilst revenue came in line with Wall Street's expectations at 1.17 billion.

S&P 500 forecast – technical analysis.

The S&P 500 extended its recovery from the 4800 low to a peak of 5975 yesterday before easing lower below the 5850 support at the time of writing. The bearish engulfing candle was an ominous signal, which could see sellers extend losses towards the 200 SMA at 5775. Buyers will look to extend gains above 55850 and 6000 to bring 6130 and fresh record highs into focus.

FX markets – USD rises, EUR/USD falls

The USD is rising modestly but remains close to two-week lows amid fiscal concerns and after a tepid auction area of treasury bonds. The lacklustre 20-year bond sale reinforced the sell America narrative.

The EUR/USD is falling amid a rising USD and after the eurozone PMI data showed that business activity tipped back into contraction. The composite PMI, which is considered a good gauge for business activity, fell to 49.5, down from 50.4 in April, dropping below the 50 level that separates expansion from contraction.

GBP/USD is unchanged, holding above 1.3420,, down from a three-year high,, after UK PMI manufacturing data misses forecasts. UK manufacturing contracted at a faster rate with a PMI of 45.1, whilst the services PMI stagnated at 50.1. Following sticky inflation data earlier in the week and the weak PMI figures, the economy is in danger of tipping into stagflation.

Oil rises OPEC+ supply increase worries

Oil prices are falling for a third straight day dropping towards the key $60.00 a barrel level on a surprise US invent a rebuild and potential increase 2 OPEC output.

A report that OPEC+ is discussing whether to make another large output increase in their meeting on June 1st is dragging on oil prices. An increase of 411,000 barrels per day for July is among the options under discussion. The group had reportedly been looking to accelerate output increases to bring production up by 2.2 million barrels per day by November.

This points to OPEC+ looking to build market share in favour of defending prices.

Meanwhile, data yesterday showed that US crude inventories rose by 1.3 million barrels in the week ending May 16th. This was significantly higher than the 1.3 million barrel drawdown that investors had expected.