Midday Market Roundup for Thursday, May 22, 2025

Good afternoon. Here are the top four global financial and economic topics shaping markets at midday, Thursday, May 22, 2025:

1. Bond Yields Surge as U.S. House Passes Major Tax Bill

Long-term U.S. Treasury yields hit 18-month highs after the House of Representatives narrowly passed President Trump's sweeping tax and spending package. The bill, which expands deductions for state and local taxes and introduces significant fiscal stimulus, has raised concerns about the growing federal deficit—now over $36 trillion. The 10-year Treasury yield climbed to around 4.59%, and the 30-year yield surpassed 5%. This spike in yields has pressured equity markets and the dollar as investors worry about inflation and U.S. government debt's sustainability. Moody's recent downgrade of U.S. sovereign credit continues reverberating through markets, with analysts warning that the new legislation could add trillions to the deficit over the next decade, posing potential risks to the market.

2. U.S. Business Activity Rebounds, But Tariffs Drive Up Prices

Business activity in the U.S. improved in May, according to S&P Global's latest PMI data. The Composite Output Index rose to 52.1, signaling growth across manufacturing and services. This rebound, despite the challenges posed by tariffs, is a positive sign for the market. However, President Trump's broad import tariffs have led to higher input costs for companies and consumers, and economists expect inflation to accelerate in the coming months. Manufacturing delivery times have lengthened, and service exports—including tourism—have dropped sharply. The risk of stagflation persists as the labor market shows signs of slowing, and companies stockpile inventories in anticipation of future tariff hikes.

3. Equities Mixed: Tech Volatile, Retail and Insurance Stocks in Focus

U.S. stocks were modestly higher at midday after sharp losses on Wednesday. Notable movers included Urban Outfitters, which surged 22% after strong earnings, and Advance Auto Parts, which jumped 55% following a better-than-expected quarterly report. Snowflake gained over 11% on robust results. However, the market was not without its challenges. Health insurance stocks such as Humana and CVS Health declined after the Centers for Medicare & Medicaid Services announced expanded Medicare Advantage audits. Technology stocks remained volatile, with large-cap names like Apple and Tesla still under pressure from recent profit-taking and higher yields. This mixed performance of equities is reflective of the current market dynamics, with some sectors benefiting from strong earnings and others facing headwinds from regulatory changes and market volatility. Meanwhile, Coinbase shares rose as Bitcoin hit a new all-time high, and gold prices strengthened amid market caution.

4. Global Markets and Commodities React to U.S. Fiscal and Trade Developments

Asian and European markets were subdued, with Japan's Nikkei and China's CSI 300 declining as the stronger yen and ongoing trade uncertainties weighed on sentiment. European stocks slipped after weaker-than-expected PMI data, particularly in Germany and across the eurozone. In commodities, gold futures climbed to $3,313.50 per ounce as investors sought safe havens, while oil prices retreated on concerns about global demand and rising inventories. Bitcoin continued its rally, reaching a new record above $63,000, as investors look for alternatives amid concerns about U.S. fiscal policy and inflation.

1. Sources:
   Reuters (Global Markets View):
   https://www.reuters.com/business/finance/global-markets-view-usa-2025-05-22/
2. Reuters (US Business Activity Improves):
   https://www.reuters.com/business/us-business-activity-improves-may-inflation-poised-accelerate-sharply-2025-05-22/
3. CNBC (Stock Market Live Updates):
   https://www.cnbc.com/2025/05/20/stock-market-today-live-updates.html
4. Reuters (US Stock Futures Edge Down):
   https://www.reuters.com/business/us-stock-futures-edge-down-ahead-commentary-fed-officials-2025-05-20/
5. CNBC TV18 (US Stock Market Highlights):
   https://www.cnbctv18.com/market/us-stock-market-live-us-market-dow-jones-snp-500-nasdaq-bond-yields-oil-gold-surge-dollar-bearish-impact-liveblog-19607873.htm

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