US stock market: Key questions as second half of 2025 kicks off

Stocks

Summary:

The U.S. stock market enters H2 2025 at record highs, but faces key risks: Trump’s tariffs, Fed rate decisions, tech dominance, high valuations, global competition, and rising geopolitical tensions.

The U.S. stock market completed a roller-coaster first half of the year at record-high levels but a host of factors could knock equities off their perch over the rest of 2025.

The benchmark S&P 500 (.SPX), is up over 5% on the year so far, rebounding from an April plunge after an economic scare stemming from President Donald Trump's "Liberation Day" tariff plan. Here are some of the key questions facing U.S. stock investors at the start of the second half.

WILL TARIFFS BITE, OR JUST BARK?

While worst-case fears about Trump's tariffs have eased, more near-term volatility could be in store as the U.S. seeks to hammer out trade agreements in the coming weeks. A July 9 deadline on many tariffs, if it holds, could be an early second-half test for stocks.

Even if some of the harshest levies are rolled back, higher effective tariffs this year still could drive up inflation and cut into company profits and consumer spending. The effective U.S. tariff rate based on announced policies has climbed to 13% from 3% at the start of the year, Goldman Sachs analysts said last week.

After strong first-quarter profits, U.S. corporate earnings will be a critical gauge to assess whether Wall Street has properly factored in the fallout from tariffs. Second-quarter reports begin later this month, with S&P 500 earnings in the period expected to have increased 5.9%, according to LSEG IBES.

WHEN WILL THE FED CUT RATES?

Fed Chair Jerome Powell has pointed to concerns that tariffs will push up inflation as a reason for the central bank to hold off on interest rate cuts. Still, fed fund futures indicate nearly three cuts expected by the end of this year, with the first likely in September, LSEG data showed.

The Fed and Powell have endured a barrage of pressure from Trump to cut rates and the president has mused about picking a replacement for Powell soon, well ahead of the expiration of the chair's term in May 2026. That move could increase expectations for more cuts but also bring turbulence to markets concerned about the Fed remaining independent.

A weakening U.S. economy could also prompt the central bank to ease rates, and some signs of softening in the labor market mean that incoming data poses a test for asset prices. The latest monthly employment report is due on Thursday.

IS BIG TECH BACK IN CHARGE?

After a rough start to the year, technology and growth shares have retaken the reins of the market. Tech (.SPLRCT), was the best-performing S&P 500 sector in the second quarter, while the "Magnificent Seven" megacap stocks overall (MAGS.Z), have surged since the market's April lows.

The performance has revived concerns about a relatively small number of large stocks propelling the market, including that the advance may not be as strong beneath the surface. Many investors still expect more stocks to support market gains as the year goes on.

The equal-weight version of the S&P 500 - which better captures performance of the average stock in the index - is up nearly 4% in 2025.

"I would suspect that if the market is going to continue pushing higher, you're going to need to see broadening," said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management.

HOW EXPENSIVE CAN EQUITIES GET?

With the market's rebound, stock valuations have also ascended. On Friday, when the S&P 500 hit its first record high in over four months, the index's forward price-to-earnings ratio reached 22.2. That was the highest level since February and well above its long-term average of 15.8.

As investors seek to value equities, they are increasingly looking to future earnings prospects, including whether 2026 profits significantly improve. S&P 500 earnings are expected to rise 8.5% this year and 14% next year.

Another factor is Treasury yields, which tend to pressure equity valuations when they rise. While benchmark yields have subsided since earlier this year, any spike in the 10-year yield could rattle stock investors, such as if the U.S. fiscal bill moving through Congress prompts concerns about the widening deficit.

WILL 'U.S. EXCEPTIONALISM' DOUBTS DENT EQUITIES?

Questions about the allure of U.S. assets have been a global theme in 2025, triggered by Trump's stunning tariffs announcement in April that sparked uncertainty over American policy. The U.S. dollar recently hit its lowest level in three years against a basket of major currencies.

After a long period of dominance over other regions, U.S. equities have also trailed their international counterparts so far this year. Non-U.S. equities are still relatively cheap in general, creating questions about which group will win out over the rest of 2025.

WILL GEOPOLITICS RE-EMERGE AS A RISK?

Stocks pulled back briefly during the recent Israel-Iran conflict before tensions calmed, but analysts are wary that resumption of Middle East hostilities could cause fresh volatility. That would particularly be the case if constraints on oil supply led crude prices to soar above $100 a barrel.

Spikes in geopolitical unrest over the past 30 years have rarely been a headwind for U.S. equity returns, Barclays strategists said in a recent note. But they added that "geopolitical risk flare-ups do motivate bouts of elevated volatility, and risk assets in general would be vulnerable should the current conflict escalate."

Source: Reuters

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Manuel

Commodity

Middle East Situation

With futures markets having first fallen and then stabilized after the worst-case scenarios coming out of the Iran-Israel conflict did not occur, retail prices are starting to reflect that retreat.

The weekly Department of Energy/Energy Information Administration average weekly retail diesel price fell 4.8 cents/gallon effective Monday, announced Tuesday, to $3.727/g.

The decline follows three weeks of gains which added 32.4 cts/g to the benchmark used for most fuel surcharges, rising to last week’s price of $3.727/g, up from $3.451/g prior to the three-week surge.

Futures prices for ultra low sulfur diesel (ULSD) on the CME commodity exchange fell 17.87 cts/g on June 23, the first day after it appeared the Israel-Iran conflict was not going to lead to the worst case supply scenario of a closure of the Strait of Hormuz, the gateway to the Persian Gulf and its exports of about 20% of the world’s crude supply. The settlement that day was $2.2851/g.

But prices have since bounced back, helped in part by the weak U.S. dollar. Oil prices, denominated in dollars, tend to move in the opposite direction of strength in the dollar. That helped a rebound that resulted in ULSD settling Tuesday at $2.3269/g.

Beyond the movement in outright oil prices, ULSD continues to strengthen relative to crude.

On a straight comparison of first-month Brent on CME versus first-month ULSD, that spread at the close of May was about 50 cts/g. But by the last trading day of June on Monday, the spread had widened to either side of 70 cts/g for several days.

That sort of gain shows up at the pump in price increases that outpace those of crude, and decreases that lag those in the crude market.

Diesel has been increasingly burdened with tight inventories worldwide. Inventories show up in the spread between first month and second month diesel or crude, and tight stocks widen the spread between higher-priced first month ULSD and lower-priced second month.

In a perfectly balanced market, the front month price is lower than the second month price, with the higher price in the later month reflecting the time value of money and the cost of inventory. That market structure is called contango.

But when inventories are tight, the barrel to be delivered the fastest becomes the most valuable. The market then flips into a structure called backwardation, with the front month the most expensive, the second month less expensive and the third month lower still.

The backwardation has blown out in recent days. It closed May at 1.18 cts/g–meaning the front month was that much higher-priced than the second month–but by the final day of June on Monday had widened to 5.95 cts/g. Much of that increase in the spread came in the last days of the month, rising from just under 4 cts/g Wednesday to more than 7 cts/g Thursday before dropping back slightly.

Source: FreightWaves

Risk Warnings and Disclaimers

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Manuel

Forex

Central Bank

The euro’s relentless rally stalled on Tuesday as US data failed to support an imminent interest-rate cut by the Federal Reserve, prompting traders to buy the dollar.

The greenback’s recovery pressured the common currency, leading it to trade slightly weaker on the day after it touched the highest level since September 2011 earlier in the session. If it were to close higher on Tuesday, it would have been the longest streak since 2004 and eclipsed only twice since the currency’s inception in 1999.

The Bloomberg Dollar Spot Index advanced to a session high after Donald Trump’s $3.3 trillion tax and spending cut bill passed the Senate. It was also gaining after the first of this week’s three reports on US labor market conditions failed to provide justification for a Fed cut as soon as next month.

“I think the knee-jerk reaction was to buy the dollar on lower fiscal policy uncertainty,” said Win Thin, global head of markets strategy at Brown Brothers Harriman & Co. “To me, pushing through a massive tax cut will eventually widen the budget deficit, which is ultimately dollar-negative.”

The common currency declined 0.1% to $1.1777 on Tuesday, after eight days of advances pushed options traders to ramp up bullish positioning. So-called risk reversals — a closely watched measure of market sentiment — posted the third-strongest bullish repricing of the year last week. Data from the Depository Trust & Clearing Corporation show that nearly two out of three options in the past week targeted a stronger euro. Euro´s Persistent Rise Undercut by Dollar Bounce on Data, Bill_1

Euro´s Persistent Rise Undercut by Dollar Bounce on Data, Bill_1

The euro’s rally has been underpinned by a long-running slide for the dollar, with fresh momentum from weaker US data and growing conviction that the Fed is preparing to ease policy more aggressively than the European Central Bank. According to Danske Bank AS strategists led by Jens Naervig Pedersen, the dollar’s structural decline has resumed as geopolitical risks fade and focus returns to the US economy and political backdrop.

“We see many reasons to be short USD right now, including the possibility of a new Fed Chair being appointed earlier than expected, the Big Beautiful Bill on 4 July, and the tariff deadline on 9 July,” he said.

The euro has risen nearly 14% against the greenback this year so far, while a dollar index has fallen more than 9%.

Analysts increasingly see the euro rallying toward $1.20 in the coming months. Strategists at Societe Generale SA, including Kit Juckes, expect the common currency to peak at around $1.25 over the medium term, even if it lags the yen and some Asian peers in the second half of the year.

European Central Bank Vice President Luis de Guindos said Tuesday that while a move to $1.20 is “acceptable,” further gains would make policy makers’ task more complicated.

What Bloomberg Strategists Say

“While a mild strengthening of the currency doesn’t pose a particular concern for the ECB, gains that are too rapid tend to tighten financial conditions and may threaten to crimp economic growth.” — Ven Ram, Macro Strategist, Dubai. Click here for the full piece.

For Nicholas Wall, head of Global FX Strategy at J.P. Morgan Asset Management, the ECB is doing the right thing by embracing a euro that’s attracting more demand as a reserve currency. “A stronger euro is good for Europe partly in the context of rising oil prices,” he said.

The latest euro-area inflation data offered little reason for the ECB to alter its stance. Consumer prices rose in France and Spain but held steady in Italy and unexpectedly eased in Germany, reinforcing the central bank’s view that inflation will converge sustainably toward its 2% target.

Source: Bloomberg

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Adam

Cryptocurrency

Although the cryptocurrency market has seen a slight decline in recent days, Bitcoin continues to dominate. This has resulted in altcoins recording their weakest performance against BTC in years.

The total market capitalization excluding Bitcoin recovered by nearly 10% last week. Sitting at a critical support level of $1 trillion, the new week has started calmly for altcoins. If this support zone holds across the altcoin market, it could indicate that the capital flowing into crypto—currently dominated by Bitcoin—may begin to shift towards altcoins. In particular, expectations around ETFs, the possibility of early Fed rate cuts, and the launch of new altcoin-based products could support this transition.

Several developments within the internal dynamics of the crypto market may also gradually shift investor sentiment in favor of altcoins. The ongoing ETF progress for Ethereum, the launch of a staking-integrated ETF for Solana, and rising institutional interest in Bitcoin Cash are just some examples of this growing momentum toward altcoins.

While ETF Uncertainty Persists in Ethereum, Medium-to-Long-Term Potential Remains

Ethereum, which leads the altcoin market, continues to face pressure—most recently from the SEC’s decision to delay the Ethereum staking ETF proposed by Bitwise.

The SEC’s approval of the spot Ethereum ETF last year was a major milestone. Now, the potential inclusion of staking could mark another turning point for ETH. The possible returns from introducing staking into ETFs, along with broader spot ETF approvals, remain powerful catalysts for Ethereum over the medium to long term.

At the same time, increased activity on the Ethereum network and recent upgrades are contributing to its stability. The expansion of institutional Ethereum products in the second half of the year could also bring ETH back into focus. In the short term, however, ETH remains under technical pressure.

3 Altcoins That Stand to Gain If Capital Rotates Away From Bitcoin_1

Ethereum recently rebounded alongside the broader market following a ceasefire between Israel and Iran. As a result, ETH recovered the support level we’ve been monitoring at $2,430, driven by renewed buying interest.

Currently, ETH is trading sideways above the $2,430 support, but ongoing pressure is making it difficult to break into the $2,500 region. If ETH manages to secure daily closes above $2,500, this could open the door for a move towards $2,700. The resistance at $2,730 has remained unbroken since May. A high-volume breakout above this level could trigger a rally towards the $3,000–3,400 range.

However, if ETH—already under pressure—falls below the $2,430 support without any shock developments, we could see an increase in selling pressure. If that happens, and ETH dips below the 3-month EMA at $2,380, the likelihood of a move towards $2,000 increases significantly.

ETF Movement in Solana Creates Excitement

Solana’s REX-Osprey SOL+Staking ETF is the first spot ETF to integrate staking rewards. Launching on July 2, 2025, this product offers investors exposure to both SOL price action and passive staking income. This first-of-its-kind ETF has been met with short-term positive sentiment.

However, this ETF development coincides with a weakening of Solana’s network fundamentals. Stablecoin value on the network has declined since the start of the year, and revenues have also fallen. This suggests waning interest in Solana, which is also making it technically difficult for SOL to break out of its short-term downtrend. At this stage, sustained interest in the ETF could boost demand for SOL again. For stronger price action, we’ll need to see a recovery in network usage and an increase in institutional fund flows.

3 Altcoins That Stand to Gain If Capital Rotates Away From Bitcoin_2

Recent buying activity in Solana helped break the short-term downtrend. However, following the ETF news, the typical “sell the news” reaction in crypto kicked in, and the SOL price now appears to be retesting the trendline.

Accordingly, $148 is a key support level for SOL. If buyers can defend this level, it would confirm the continuation of the uptrend. In this case, we could see Solana advancing toward price targets of $165, $183, and $202, respectively.

Conversely, if daily closes fall below the $148 support, a pullback toward the $130 level becomes likely.

Bitcoin Cash Maintains Strong Outlook With the Support of Institutional Buying

Bitcoin Cash has recently emerged as one of the market’s standout assets. BCH, currently trading at $523, is revisiting levels not seen since December 2024.

After beginning its uptrend in April, BCH was only marginally affected by the May correction and managed to maintain its positive momentum through June. The recent divergence in BCH—both technically and in terms of investor interest—positions it as a notable option for short-term speculative trading. That said, the sustainability of this uptrend will depend on broader market conditions and macroeconomic developments.

3 Altcoins That Stand to Gain If Capital Rotates Away From Bitcoin_3

Technically, the Stochastic RSI on the daily chart indicates that BCH may continue its upward move. Based on the last bearish wave (from December 2024 to April 2025), the nearest resistance lies at $544 (Fib 0.786). If BCH can close above this level on a weekly basis, it could continue its momentum toward the $620 resistance, followed by a medium-term target range of $720–840.

If BCH fails to break above $544, profit-taking may accelerate. In that case, a retreat to the $485 support (Fib 0.618) would be the likely first stop.

Source: investing

Risk Warnings and Disclaimers

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Adam

Economic

Senate leaders advanced President Trump's "One Big Beautiful Bill" on Tuesday in a vote that moved the megabill one step closer to becoming law despite three Republican defections, leading to a 50-50 tally that required Vice President JD Vance to break the tie in Trump's favor.

The process proved exceptionally contentious in recent days, largely over healthcare provisions and trims to the Medicaid program that are set to extract hundreds of billions in government savings but cause millions to lose coverage.

This portion of the bill fueled two of the Republican no votes — Thom Tillis of North Carolina and Susan Collins of Maine — and led to last-minute concessions to Lisa Murkowski of Alaska as a way of securing her yes vote.

The third Republican no vote was Rand Paul of Kentucky, who objected to the inclusion of a $5 trillion debt ceiling increase in the package.

Medicaid and that debt ceiling increase were just two pieces of a complex, nearly 900-page bill that is set to reshape whole swathes of the US economy, especially in the areas of tax rates, energy, and healthcare.

Clean energy companies — especially electric-vehicle maker Tesla (TSLA) — were perhaps paying the closest attention in recent days.

Tesla CEO Elon Musk emerged during final negotiations as the top business-world critic of the bill, attacking the price and how it treats clean energy. He said earlier Tuesday that the $3.3 increase in debt expected from the bill makes a "mockery" of his work at the Department of Government Efficiency (DOGE).

Musk and others are also set to see impacts on their bottom line, with government support in the form of tax credits set to go away. But a last-minute change appeared to remove what could have been a new headwind in the form of an excise tax, which had raised particular ire.

Economists have likewise noted that the final price tag, which could top $4 trillion, and critiqued an accounting gimmick Republicans employed to hide much of that red ink.

Silicon Valley has growing questions after a last-minute change stripped a closely watched artificial intelligence provision from the bill.

But a range of GOP priorities that are included — from increased funding for border enforcement to the military to money for America's 250th anniversary celebration next year — pushed the bill over the line, with many in corporate America in favor and focused on the tax-cuts piece.

The Business Roundtable, which represents CEOs in Washington, D.C., urged passage in recent days and called it "critical legislation [to] protect and enhance the transformative economic benefits that President Trump's historic 2017 tax reform delivered for American businesses, workers and families."

President Trump on Tuesday morning expressed confidence it would reach his desk soon, calling it the "greatest bill ever passed," focusing on the border provisions and dismissing concerns that Americans would love their healthcare coverage.

The legislation now moves back to the US House of Representatives, which, after passing a previous version in May, is set to move quickly ahead, perhaps within hours, but with passage far from assured as criticisms from fiscal conservatives pile up in recent days (and Musk focused on flipping votes there).

For now, here is a closer look at three ways the current version of the bill, as blessed by the Senate, would impact the business world.

Changes for both the individual and corporate tax structure

A centerpiece of the bill — and far and away the most expensive provisions — surrounds taxes.

The bill's main impetus has long been to permanently extend tax cuts for individuals contained in the 2017 Tax Cuts and Jobs Act, which Trump signed into law on a temporary basis during his first term as president.

The bill would represent a continuation of the status quo for taxpayers. As one example, if the bill is enacted, America's highest earners will see a continued top rate of 37%.

The bill also provides new tax credits for individuals by fulfilling signature Trump campaign promises — albeit slightly less fulsomely than in the House version — to eliminate taxes on tips, overtime, and car loan interest. It also offers an expanded standard deduction for seniors after Trump promised to eliminate taxes on Social Security benefits.

Employees would be able to deduct up to $25,000 annually for tips and overtime in the Senate version, in contrast to the House's approach of 100% deductibility under certain income limits.

Business owners, meanwhile, are keenly focused on a series of tax deductions that will reinstate credits for corporations for things like property depreciation, capital investments, new factory construction, interest expenses, and research and development costs.

Many of these provisions were present in the House version, but only temporarily. Permanency was a key Senate priority and is now included in the bill, even as it increased the price tag.

The bill also makes permanent the pass-through deduction at a rate of 20%. That deduction — formally known as the 199A deduction — is focused on often smaller businesses organized as S corporations or partnerships.

The Senate version also includes an array of other tax changes, including a $40,000 annual deduction for state and local taxes (SALT) for some taxpayers in the coming years, enhanced credits for "opportunity zones," and so-called MAGA accounts.

A focus on energy and healthcare

The effect on the energy sector could be profound, especially after a last-minute series of changes turned the bill even further against the clean energy industry while offering new support for fossil fuels.

The bill has long been expected to phase out Biden-era clean energy tax credits, but the final Senate bill now aims to shut them down faster than expected.

A late addition to the bill also raised particular pique in the form of a new tax on wind and solar projects completed after 2027 if a certain amount of supplies came from China. But those objections appear to have led to a moderation, with CNN first noticing Tuesday morning that a final draft quietly removed that excise tax.

It gave clean energy advocates some solace, with Democratic Sen. Ed Markey of Massachusetts posting only that "We just forced them to take it out."

At the same time, new last-minute inducements were unveiled for fossil fuels, including one classifying coal as a critical mineral for a government manufacturing credit.

"We're doing coal," Trump said in an interview released over the weekend on Fox News' "Sunday Morning Futures," where he also called solar energy projects "ugly as hell."

It was a mix that led Musk and others to predict that it would cut off clean energy, hurt the overall energy grid, and perhaps lead to higher utility bills. A statement from the American Clean Power Association said the effect would be to "undermine growth in domestic manufacturing and land hardest on rural communities who would have been the greatest beneficiaries of clean energy investment."

The bill is also set to implement major changes to the healthcare system, which Democrats say will hurt the social safety net and the healthcare sector.

Healthcare negotiations went until nearly the literal last minute, but the overall package is set to trim the government's Medicaid spending by around $900 billion in the years ahead.

Corners of the sector, like rural hospitals, are set to be most directly impacted. A $25 billion fund was included to cushion the blow for these providers from 2028 to 2032.

But the bottom line for patients — according to an accounting from the Congressional Budget Office that came in over the weekend — is that 11.8 million additional residents would become uninsured by 2034 because of the healthcare provisions.

Some would be illegal immigrants, as Republicans often point out, but millions are expected to be US citizens put off by a raft of additional requirements to qualify for coverage.

Capitol Hill has yet to offer its final verdict on the package, with House deliberations still in the offing, but the healthcare provisions in particular appear to have led Americans to grow increasingly skeptical.

A series of polls has shown a decline in support for the bill as the focus has turned to healthcare. Even a recent Fox News national poll found a 21-point gap between those who say they are opposed (59%) and those who say they are in favor (38%).

source :finance.yahoo

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Adam

Economic

GOP senators signaled they're close to bringing President Donald Trump's One Big Beautiful Bill Act to a vote in the Senate today, with sights set on it clearing the House as soon as Wednesday. President Trump has demanded that Congress deliver the federal budget and tax bill to his desk for a signature by July Fourth. But there's still a chance that a rewrite could be necessary.

Some House GOP moderates dislike the sharper Medicaid spending curbs imposed by the Senate, while fiscal conservatives disapprove of the 940-page bill's bottom line. The Senate also took a tougher line on renewable energy tax credits, which prompted Tesla (TSLA) CEO Elon Musk to weigh in against the bill.

Big Beautiful Bill's Budget Math

Yet, apart from Tesla sliding as the Trump-Musk fight reignites, markets continue sailing along. Hospital stocks shrugged off deeper Medicaid cuts, as investors may believe moderates will limit the damage. Even renewable stocks bounced on news that Sen. Lisa Murkowski, R-AK, , a key undecided vote, had an amendment to preserve production tax credits.

But if relief is in store for Medicaid spending cuts and Inflation Reduction Act tax credits, fiscal conservatives could bolt. And if they don't, that suggests bigger federal deficits, putting upward pressure on borrowing costs. Yet, the 10-year Treasury yield, trading in a tight range, is holding at 4.27%, suggesting little concern among bond investors.

A bit more clarity could come soon. Politico is reporting that Senate leaders will offer a broad amendment to seal up the remaining vote or two they need to assure passage. The amendment may tweak both Medicaid cuts and renewable tax credits.

Medicaid Cuts

The reality of the Big Beautiful Bill's tough trade-offs burst into the open on Sunday night, as Sen. Thom Tillis (R-N.C.) denounced Medicaid provisions that he said would cost his state $26 billion in support and kick 663,000 North Carolinians off their health plans. The speech also effectively ended his national political career, with Tillis opting to call off his 2026 reelection campaign, rather than do battle against both Trump and the Democrats.

Hospital operators including Tenet Healthcare (THC) slipped early Monday but then rallied, despite the revised Senate bill targeting $930 billion in cuts to Medicaid spending and about $230 billion in cuts to spending on tax credits to buy insurance on the Affordable Care Act health insurance exchanges.

By comparison, the House sought $793 billion in Medicaid cuts. And the Senate may not be done yet, with a vote still expected on an amendment that would gradually shift the 90%-10%, federal-state split of ACA Medicaid expansion costs closer to 50%-50%.

The Congressional Budget Office found that the House version of the OBBBA would increase the ranks of the uninsured by 10.9 million. That rises to 16 million due to the GOP's apparent decision to let enhanced premium tax credits for the ACA exchanges expire at the end of the year. The CBO hasn't yet evaluated the impact of the latest Senate version.

On June 24, 16 House Republicans wrote to Senate Majority Leader John Thune, taking issue with the Senate version of the bill that fails to "give hospitals time to adjust to new budgetary constraints."

Federal Budget Reverses Inflation Reduction Act

The Senate GOP's OBBBA changes to Inflation Reduction Act clean-energy tax credits also one-upped the House version. Both would reel in more than $400 billion in savings, however the Senate version goes a step further. Politico and other outlets reported on an analysis by Rhodium Group that indicates new wind and solar projects would face a tax starting in 2028, raising their cost by 10% to 20%, if they source components from China.

Musk said the Senate bill will "destroy millions of jobs," in a Sunday post. "While it subsidizes outdated industries, it deals a severe blow to future industries." On Monday, Musk went further, threatening to create a third party to target lawmakers who back the Big Beautiful Bill.

The bill, as expected, ends the $7,500 electric vehicle tax credit.

OBBBA Budget Math

The Senate cut a few hundred billion less than the House in food aid and student loans. That at least partly explains why the bill doesn't come close to clearing the fiscal bar set by the House, which required that tax cuts exceed spending cuts by no more than $2.5 trillion over 10 years.

Based on the current law baseline, which assumes expiration of most 2017 tax cuts at the end of this year, CBO said the Senate version has $4.47 trillion in tax cuts and $1.21 trillion in spending cuts, raising deficits by $3.26 trillion. Based on current policy, CBO says the Senate bill cuts spending by $1.34 trillion and lowers taxes by $829 billion, lowering the deficit by $508 billion.

S&P 500

The S&P 500 dipped 0.1% in early Tuesday stock market action. On Monday, the S&P 500 rose 0.5% to a record high, leaving the benchmark index up 5.5% for the year and 7.3% since Election Day.

Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.

Source: investors

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Manuel

Central Bank

Forex

Federal Reserve Chair Jerome Powell said Tuesday the U.S. central bank has no plans to change how it offers dollar liquidity to other official entities.

Speaking on the matter of the Fed's dollar swap lines system, Powell told a gathering held by the European Central Bank that "we still have the same authorities, and we're still prepared to use them in situations where it's within our legal authorities and where we think it makes sense."

He added the dollar swap lines have made "a big contribution" to global financial stability.

Fed dollar swap lines offer collateralized loans to eligible central banks to ensure dollar liquidity is not an issue for the global financial system.

The current system, initiated during the global financial crisis, has been heavily used in times of crisis.

Fed swap lines now in place can lend dollar and foreign currencies, although it is the dollar-related facility that has been where the action has been. The swap line usage level can often be viewed as a proxy for international financial stress.

There has been some concern that the Fed's currency swap lines could be shuttered amid the Trump administration's retreat from multilateral international coordination and its broader skepticism over Fed actions, although so far, no action by elected officials has happened.

The system may also face longer run challenges as the trade policy pursued by the president may threaten the status of the dollar as a global reserve currency, which could make American money less needed by other nations, in turn reducing the need to borrow dollars in times of stress.

Speaking at the same central bank event, Bank of Korea Governor Rhee Chang-yong noted that while the dollar swap lines had helped in times of trouble there were times when there could be local dollar liquidity issues the U.S. central bank could not address.

"Our understanding is that Fed cannot extend the swap lines in that case, and we have to self defense ourselves. That is why I think they're having an adequate, sufficient level of reserves is very important."