The Day Ahead: Can Markets Steady Today as Budget and Yield Fears Persist?

Economic

Summary:

Markets attempt to stabilize after sharp losses driven by rising Treasury yields and U.S. budget fears. Key earnings, economic data, and Fed commentary may shape sentiment amid ongoing deficit and inflation concerns.

Market Overview

U.S. equity futures are edging higher early Thursday following a sharp sell-off in the prior session. S&P 500 and Nasdaq 100 futures are up 0.14% and 0.18% respectively, while Dow futures are flat.

Wednesday’s session saw heavy downside pressure, with the Dow shedding over 800 points and the S&P 500 dropping 1.6% as Treasury yields spiked on renewed deficit concerns. The driver remains the contentious U.S. budget bill, now stalled due to internal GOP divisions over SALT deductions.

The budget bill’s potential to add trillions to the national deficit stoked fears of resurgent inflation, pushing yields to multi-month highs. This macro backdrop continues to weigh on sentiment and is the key risk catalyst into today’s session.

Key Economic Releases

Traders will be closely watching several economic reports due Thursday:

Weekly jobless claims (Week ending May 17) – 12:30 GMT

S&P Global Flash Manufacturing PMI (May) – 13:45 GMT

S&P Global Flash Services PMI (May) – 13:45 GMT

Existing Home Sales (April) – 14:00 GMT

The PMI prints are particularly relevant as traders assess the impact of tariffs and rising rates on economic resilience. Jobless claims will also provide an updated read on labor market tightness.

Notable Earnings

Before the bell, watch for:

Ralph Lauren (RL) – Expected EPS: $2.02

Analog Devices (ADI) – Expected EPS: $1.69

BJ’s Wholesale (BJ) – Expected EPS: $0.92

After the bell, key reports include:

Intuit (INTU) – Expected EPS: $10.90

Workday (WDAY) – Expected EPS: $2.01

Ross Stores (ROST) – Expected EPS: $1.44

These names could influence both consumer discretionary and tech sentiment, with INTU and WDAY especially in focus for Nasdaq-watchers.

Central Bank Activity

At 18:00 GMT, New York Fed President John Williams is scheduled to speak. Markets will be listening for any commentary on inflation and deficit implications for future rate policy. With bond markets jittery, even indirect Fed signals could move yields and risk assets.

Commodities, Crypto, and Bonds

Daily Gold (XAU/USD)

Gold rallied to a two-week high at $3,340.53, supported by a weaker dollar and defensive flows amid debt concerns.

Meanwhile, Bitcoin surged past $111,000, hitting a fresh record as institutional interest and favorable U.S. regulatory signals offset equity market stress.

Yields remain elevated: the 10-year trades at 4.59% and the 30-year has breached 5.09%, a level not seen since October 2023. Soft demand in Wednesday’s 20-year auction underscored fading appetite for U.S. debt.

Technical Outlook

Daily E-mini S&P 500 Index

The S&P 500 futures chart shows price action pulling back from the recent 5,993.50 high, now hovering near 5,868, just below the 200-day SMA at 5,885.71. The short-term support zone lies near 5,837.25, followed by a deeper pivot at 5,611.2 (50-day SMA). Rejection at the 200-day may signal a deeper retracement, while reclaiming 5,993.50 would open the door to the 6,236.50 resistance.

Outlook

Today’s session hinges on debt-ceiling rhetoric, Treasury yield moves, and key macro prints. With resistance from yields, fragile sentiment, and major earnings still ahead, markets may remain reactive and headline-driven. Traders should watch for yield stabilization and any shift in budget bill negotiations.

Source: fxempire

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Glendon

Economic

Forex

Federal Reserve Governor Christopher Waller said the central bank could cut interest rates in the second half of 2025 if the Trump administration’s tariffs on US trading partners settle around 10%.

“If we can get the tariffs down closer to 10% and then that’s all sealed, done and delivered somewhere by July, then we’re in good shape for the second half of the year,” Waller said Thursday during an appearance on Fox Business.

“Then we’re in a good position at the Fed to kind of move with rate cuts through the second half of the year,” he added.

Fed officials have held the central bank’s benchmark interest rate steady this year, citing an overall solid economy and uncertainty surrounding President Donald Trump’s tariff policies.

Trump has implemented a baseline 10% tariff on dozens of US trading partners, and has temporarily paused plans for higher levels of duties. He has also hit many Chinese imports with a 30% tariff, after previously setting levies on China in excess of 100%.

Economists broadly expect Trump’s trade policies to drag down economic growth and put upward pressure on inflation even with the temporary reduction in tariffs against China. Waller reiterated he expects any increase in inflation related to tariffs to be temporary.

Waller said if the administration reverts back to higher levels of tariffs, it would “have much bigger impacts on inflation and put more of a handcuff on us to do anything with short-term rates.”

Waller spoke shortly after Trump’s signature tax bill narrowly passed the House. The bill, which heads next to the Senate, would extend Trump’s first-term tax cuts, increase the US debt ceiling and add to the nation’s deficit.

Amid growing concerns over the US fiscal outlook, longer-dated Treasuries on Wednesday extended a selloff after an auction for 20-year bonds was greeted with weak demand. The yield on the 30-year bond rose above 5%, to its highest since 2023.

Asked about the weaker-than-expected bond action, Waller said “markets are looking for a little more fiscal discipline.”

Source: Bloomberg Europe

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Michelle

Economic

Forex

The number of Americans filing new applications for unemployment benefits dropped last week, suggesting the economy maintained a steady pace of job growth in May.

Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 227,000 for the week ended May 17, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week.

They expect claims in the coming weeks to drift into the upper end of their 205,000-243,000 range for this year, mostly driven by difficulties adjusting the data for seasonal fluctuations. That would not suggest a material shift in labor market conditions.

Employers have been largely reluctant to lay off workers despite rising economic uncertainty caused by President Donald Trump's constantly shifting trade policy. Economists, however, see layoffs picking up in the second half of 2025 as the administration's import duties dampen demand, snarl supply chains and stoke inflation.

The claims data covered the period during which the government surveyed businesses for the nonfarm payrolls component of May's employment report.

The economy added 177,000 jobs in April. Economists expect job growth to slow below 100,000 per month, which they say is needed to keep up with growth in the working-age population.

Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will shed more light on the health of the labor market in May. The so-called continuing claims increased 36,000 to a seasonally adjusted 1.903 million during the week ending May 10, the claims report showed.

Companies have been reluctant to add to headcount because of the economic uncertainty related to tariffs. That has left many people who lose their jobs to experience long spells of unemployment. The median duration of unemployment jumped to 10.4 weeks in April from 9.8 weeks in March.

Source: Yahoo Finance

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Risk Warnings and Disclaimers

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Glendon

Economic

Forex

JPMorgan Chase Chief Executive Jamie Dimon said on Thursday U.S. President Donald Trump's massive tax and spending bill could help bring stability but it is not conducive to deficit reduction.

The bill cleared a crucial hurdle on Wednesday, as the U.S. House of Representatives voted roughly along party lines to begin a debate that would lead to a vote on passage on Thursday.

"I think they should do the tax bill. I do think it'll stabilise things a little bit but it'll probably add to the deficit," Dimon said at JPMorgan's Global China Summit in Shanghai.

Reuters obtained a recording of Dimon's remarks made at the closed-door event. JPMorgan did not immediately respond to a Reuters request for comment.

The new bill is estimated to add $3.8 trillion to the U.S. government's $36.2 trillion in debt over the next decade. Credit rating firm Moody's last week stripped the U.S. government of its top-tier credit rating over the mounting national debt.

"I think the deficit will be large and probably growing," Dimon said from Shanghai, where the Wall Street firm's China business is based.

Dimon called for "responsibility" in spending, and warned governments could spend money while failing to spur growth.

"It's not just the United States, but governments have shown an amazing ability to spend your money not wisely, set rules and regulations to slow down growth," he said.

Dimon said efficient budgeting, planning and investing would drive growth and effectively help reduce the deficit.

"But I don't think you see it on the big, beautiful bill," he added, referring to the legislation proposed by Trump.

Dimon told Bloomberg News earlier in the day that he couldn't rule out that the U.S. economy will fall into stagflation as the country faces huge risks from geopolitics, deficits and price pressures.

He said the U.S. Federal Reserve was doing the right thing to wait and see before it decides on monetary policy, Bloomberg News reported.

Earlier this month, the Federal Reserve kept interest rates steady but warned that the risks of higher inflation and unemployment had risen, further clouding the U.S. economic outlook.

"I think the chance of inflation going up and stagflation is a little bit higher than other people think," Dimon had previously said.

Source: Yahoo Finance

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Warren Takunda

Economic

House Republicans stayed up all night to pass their multitrillion-dollar tax breaks package, with Speaker Mike Johnson defying the skeptics and unifying his ranks to muscle President Donald Trump’s priority bill to approval Thursday.

With last-minute concessions and stark warnings from Trump, the Republican holdouts largely dropped their opposition to salvage the “One Big Beautiful Bill” that’s central to the GOP agenda. The House launched debate before midnight and by dawn the vote was called, 215-214, with Democrats staunchly opposed. It next goes to the Senate.

“To put it simply, this bill gets Americans back to winning again,” said Johnson, R-La.

The outcome caps an intense time on Capitol Hill, with days of private negotiations and public committee hearings, many happening back-to-back, around-the-clock. Republicans insisted their sprawling 1,000-page-plus package was what voters sent them to Congress — and Trump to the White House — to accomplish. They believe it will be “rocket fuel,” as one put it during debate, for the uneasy U.S. economy.

Trump himself demanded action, visiting House Republicans at Tuesday’s conference meeting and hosting GOP leaders and the holdouts for a lengthy session Wednesday at the White House. Before the vote, the administration warned in a pointed statement that “failure to pass this bill would be the ultimate betrayal.”

Central to the package is the GOP’s commitment to extending some $4.5 trillion in tax breaks they engineered during Trump’s first term in 2017, while temporarily adding new ones he campaigned on during his 2024 campaign, including no taxes on tips, overtime pay, car loan interest and others.

To make up for some of the lost tax revenue, the Republicans focused on changes to Medicaid and the food stamps program, largely by imposing work requirements on many of those receiving benefits. There’s also a massive rollback of green energy tax breaks from the Biden-era Inflation Reduction Act.

Additionally, the package tacks on $350 billion in new spending, with about $150 billion going to the Pentagon, including for the president’s new “ Golden Dome” defense shield, and the rest for Trump’s mass deportation and border security agenda.

All told, the nonpartisan Congressional Budget Office estimates 8.6 million fewer people would have health care coverage and 3 million less people a month would have SNAP food stamps benefits with the proposed changes.

The CBO said the tax provisions would increase federal deficits by $3.8 trillion over the decade, while the changes to Medicaid, food stamps and other services would tally $1 trillion in reduced spending. The lowest-income households in the U.S. would see their resources drop, while the highest ones would see a boost, it said.

House Democratic leader Hakeem Jeffries of New York read letters from Americans describing the way the program cuts would hurt them. “This is one big ugly bill,” he said.

As the minority, without the votes to stop Trump’s package, Democrats instead offered up impassioned speeches and procedural moves to stall its advance. As soon as the House floor reopened for debate, the Democrats forced a vote to adjourn. It failed.

In “the dark of night they want to pass this GOP tax scam,” said Rep. Pete Aguilar, D-Calif.

Other Democrats called it a “big, bad bill” or a “big, broken promise.”

Pulling the package together and pushing it to passage has been an enormous political lift for Johnson, with few votes to spare from his slim GOP majority whose rank-and-file Republicans have conflicting priorities of their own.

Conservatives, particularly from the Freedom Caucus, held out for steeper spending cuts to defray costs piling onto the nation’s $36 trillion debt.

At the same time, more moderate and centrist GOP lawmakers were wary of the changes to Medicaid that could result in lost health care for their constituents. And some worried the phaseout of the renewable energy tax breaks will impede businesses using them to invest in green energy projects in many states.

One big problem had been the costly deal with GOP lawmakers from New York and other high-tax states to quadruple the $10,000 deduction for state and local taxes, called SALT, to $40,000 for incomes up to $500,000, which was included in the final product.

For every faction Johnson tried to satisfy, another would roar in opposition.

Late in the night, GOP leaders unveiled a 42-page amendment with a number of revisions.

The changes included speedier implementation of the Medicaid work requirements, which will begin in December 2026, rather than January 2029, and a faster roll back of the production tax credits for clean electricity projects, both sought by the conservatives.

Also tucked into the final version were some unexpected additions — including a $12 billion fund for the Department of Homeland Security to reimburse states that help federal officials with deportations and border security.

And in a nod to Trump’s influence, the Republicans renamed a proposed new children’s savings program after the president, changing it from MAGA accounts — money account for growth and advancement — to simply “Trump” accounts.

Rep. Erin Houchin, R-Ind., said Americans shouldn’t believe the dire predictions from Democrats about the impact of the bill. “We can unlock the ‘Golden Age’ of America,” she said, echoing the president’s own words.

By early morning hours, the chief holdouts appeared to be falling in line. Rep. Ralph Norman, R-S.C., said they “got some improvements.”

But two Republicans voted against the package, including Rep. Thomas Massie of Kentucky, a deficit watcher who had been publicly criticized by Trump, remained unmoved. “This bill is a debt bomb ticking,” he warned.

And Rep. Andy Harris, the chairman of the Freedom Caucus who wanted more time, voted present. Some others did not vote.

Final analysis of the overall package’s costs and economic impacts are still being assessed.

Along with extending existing tax breaks, it would increase the standard income tax deduction, to $32,000 for joint filers, and boost the child tax credit to $2,500. There would be an enhanced deduction, of $4,000, for older adults of certain income levels, to help defray taxes on Social Security income.

To cut spending, those seeking Medicaid health care, who are able-bodied adults without dependents, would need to fulfill 80 hours a month on a job or in other community activities.

Similarly, to receive food stamps through SNAP, those up to age 64, rather than 54, who are able-bodied and without dependents, would need to meet the 80 hours a month work or community engagement requirements. Additionally, some parents of children older than 7 years old would need to fulfill the work requirements.

Republicans said they want to root out waste, fraud and abuse in the federal programs.

Source: AP

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Gerik

Commodity

Political

China–U.S. Trade War

Iran’s Oil May Rejoin the Global Market—At China’s Expense

Recent remarks by President Donald Trump indicate that U.S.-Iran nuclear talks are edging closer to a deal, and if finalized, the agreement could include lifting key sanctions on Iran’s oil sector. This development would have far-reaching consequences—especially for China’s independent refiners, often called “teapots,” many of which are located in Shandong province.

Though China officially reports no Iranian crude imports, satellite data and ship tracking from firms like Kpler estimate that China absorbed roughly 77% of Iran’s 1.6 million barrels per day in exports last year, mostly via opaque routes involving ship-to-ship transfers and shell companies. These refineries processed the crude at a discount, allowing them to survive in a fiercely competitive domestic market despite thin profit margins and underutilized capacity.

A Sanctions Rollback: Boon for Iran, Blow to Shandong

Iran’s crude oil output averaged 3.3 million barrels per day in 2024, according to OPEC. If sanctions are lifted, Tehran could ramp up production by another 500,000 barrels per day within six months, analysts say. This influx would lower oil prices further—already down from $82 per barrel in January to around $65—pressuring global refiners.

For China’s teapots, the threat is twofold. First, their cost advantage in processing Iranian crude would vanish as Iran’s oil becomes legally available to all global buyers. Second, a broader fall in oil prices would squeeze refining margins further. Many of these smaller plants already operate at just 50% capacity or below due to domestic oversupply and limitations on exporting refined products.

Winners and Losers in the New Oil Landscape

If forced to shut down or reduce operations, these small refiners may cede market share to China’s state-owned oil giants like Sinopec and PetroChina, who are better equipped to handle price fluctuations and have stronger export infrastructure. Meanwhile, a drop in global refining output—driven by closures of weaker players—could offer price support to surviving firms globally.

Ironically, while Iran benefits by reclaiming its market position, and major global refiners adjust to tighter supply competition, Trump’s move may unintentionally benefit the wider oil refining industry—even as it wipes out China’s teapots.

The potential re-entry of Iranian oil into the formal global market is set to trigger major structural shifts. China’s independent refiners, who thrived in legal gray zones, now face existential threats. For Iran, this is a moment of resurgence. For China’s oil sector, it may mark the beginning of market consolidation—with national champions standing to gain from the shakeout.

Source: AFP

Risk Warnings and Disclaimers

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Warren Takunda

Stocks

London stocks had fallen further by midday on Thursday amid concerns about US debt and following the release of higher-than-expected UK borrowing figures and an uninspiring reading on the services sector.

The FTSE 100 was down 0.7% at 8,747.01.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The growing mountain of US debt is causing ripples of worry across financial markets, with signs investors are baulking at financing the Trump administration. These concerns have hit sentiment in Europe, given the repercussions that financial difficulties in the world’s largest economy would have on the global economy.

"It seems that every time Trump heralds a policy as ‘beautiful’ it has an ugly effect on financial markets. First it was tariffs, now it’s the huge tax and spending bill. Bond investors are far from impressed by the proposals which would extend Trump’s 2017 tax cuts and boost military spending but cut welfare payments. The congressional Budget Office has forecast the proposals would add $3.8 trillion to the US’s $36.2 trillion debt mountain over the next decade.

"An auction of 20-year Treasuries saw very weak demand, indicating the wariness about White House policy. It comes after ratings agency Moody’s stripped the US of its AAA credit rating, due to concerns about the fiscal position. The bill has cleared a crucial committee stage hurdle and a vote on the bill’s passage through the House of Representatives is due later. The falling appetite for US debt can be seen in the spike in Treasury yields, with the 30-year note surging to more than 5.1% before retreating slightly, but it’s still hovering near highs not seen since October 2023."

On home shores, a survey out earlier showed the private sector remained in negative territory in May, although the pace of decline slowed.

The latest flash S&P Global UK PMI composite output index was 49.4, below the neutral 50.0 though it was an improvement on April’s 48.5.

A reading above 50.0 indicates growth, while one below it suggests contraction.

Within that, the services PMI business activity index pushed into positive territory, up from 49.0 to 50.2, but manufacturing stalled. The output index eased to 44.8 from 45.8, while the PMI was 45.1 compared to 45.4 a month earlier.

Business activity expectations for the coming year improved, however, up from the low seen in April. That was despite a faster reduction in new order intakes during the month.

Anecdotally, respondents were less concerned about the impact of US tariffs on longer-term domestic economic prospects, although global business uncertainty continued to weigh on confidence.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "After an awful April, businesses reported a milder May.

"Business confidence has rebounded from April’s recent low, which had seen confidence collapse to a degree not seen since the Truss budget of 2022, and price pressures have moderated after spiking higher.

"However, output still fell slightly when measured across all goods and services for a second successive month, hinting at the possibility of the economy contracting in the second quarter."

Matt Swannell, chief economic advisor to the EY Item Club, said: "The PMIs can be volatile from month-to-month, and the survey has been a poor leading indicator of official GDP growth in recent years. This is largely because the survey tends to pick up changes in mood better than changes in actual activity. Though GDP growth will likely slow in the second quarter, we think it will remain comfortably in positive territory."

Investors were also mulling the latest figures from the Office for National Statistics, which showed that government borrowing rose to £20.2bn in April, up £1bn on the same month a year ago and coming in above the £18bn expected.

It was the fourth-highest figure for April borrowing since record began in 1993.

The data also showed that borrowing for the year to March was £148.3bn. This is £11bn higher than the £137.3bn forecast by the Office for Budget Responsibility but £3.7bn lower than the initial estimate.

Elsewhere, a survey revealed that consumer sentiment strengthened in May after the UK secured a key trade deal with the US.

In equity markets, budget airline easyJet flew lower as it posted a first-half loss before tax of £394m, in line with consensus, and said forward bookings for the third quarter were 80% sold.

The company added that current bookings are supportive of performance meeting full-year consensus estimates, but it remained mindful that, "consistent with this stage each year, there is still an important booking period for peak summer to go".

DCC retreated as it traded without entitlement to the dividend, while Intertek and British Land lost ground after results.

BT Group nudged lower as it posted an unexpected fall in annual revenues and pointed to further declines over the coming year.

Bloomsbury Publishing tanked as the Harry Potter publisher said full-year pre-tax profit fell 22% to £32.5m.

Close Brothers fell as Shore Capital downgraded the shares to ‘hold’ from ‘buy’, saying the third-quarter update was a "a bit of a mixed bag".

On the upside, Convatec rallied as it hailed a strong start to the year and said it was on track to deliver targets.

Marks & Spencer was boosted by an upgrade to ‘buy’ at Jefferies.

Johnson Matthey surged as it said it had agreed to sell its Catalyst Technologies business to Honeywell for £1.8bn.

Toby Carvery owner Mitchells & Butlers advanced after saying it expects annual earnings to be at the top end of estimates, and that underlying sales in the last 10 weeks had risen 6%.