Making sense of the forces driving global markets

By Lewis Krauskopf, Markets Reporter 

Jamie is enjoying some well-deserved time off, but the Reuters markets team will still keep you up to date on what moved markets today. We're watching President Donald Trump's tax cut-and-spending bill, which made it through the U.S. Senate on Tuesday and now goes back to the other U.S. legislative body, the House of Representatives. I'd love to hear from you, so please reach out to me with comments at Lewis.Krauskopf@thomsonreuters.com.

Data refreshes every time you open this email. For more U.S. market news, click here. Please send any feedback to morningbid@thomsonreuters.com.

President Donald Trump's U.S. fiscal bill took a key step forward on Tuesday, carrying with it possible risks and rewards for investors.

The legislation, narrowly passed by the U.S. Senate, would extend Trump's 2017 personal and business tax cuts, otherwise due to expire at the end of this year, and give new tax breaks in areas such as tipped income and overtime. Investors hope the tax easing might provide stimulus that supports consumer spending.

But, according to nonpartisan analysts, the bill would add an estimated $3.3 trillion to the nation's debt. Growing deficits are continuing to cloud financial markets, especially after Moody's cut America's pristine sovereign credit rating in May.

The bill still must pass the House of Representatives, where Trump's Republican party holds a slim majority, and it remains to be seen if it will become law by Trump's hoped-for deadline of the July 4 Independence Day holiday.

Graphics are provided by Reuters.

Focus was also on the Federal Reserve, and when the U.S. central bank may next cut interest rates. At a central bank gathering in Portugal, Fed Chair Jerome Powell reiterated the need to understand the impact of Trump's tariffs on inflation before lowering rates. 

But Powell also declined to rule out a possible rate cut at the Fed's July 29-30 meeting. Markets also seemed to include such a possibility: Fed Fund futures were baking in a roughly 20% chance of a cut at the July meeting, with chances deemed much more likely at the Fed's September meeting.

The rate path could become more clear with economic data in coming days, including the monthly U.S. jobs report on Thursday.

The dollar, which has fallen steeply this year, edged lower against a basket of major currencies.

In a mixed day on Wall Street, the S&P 500 and Nasdaq pulled back from record high levels, while another major U.S. index, the Dow Jones industrial average, moved closer to a record peak.

A 5% drop in Tesla shares weighed on the Nasdaq and S&P 500. Trump threatened to cut off subsidies for companies run by Tesla chief Elon Musk, escalating tensions between the one-time allies who have since fallen out. 

Musk, who spent hundreds of millions on Trump's re-election, had renewed his criticism of the fiscal bill, which would eliminate subsidies for electric vehicle purchases that have benefited Tesla.

Tesla shares could get another jolt on Wednesday when the EV carmaker releases its quarterly delivery figures.