Republican Party Sponsored Budget Breaks "Revenue Neutral" Pledge, Treasuries Extend Selloff

Barry Adams
21 May, 2025
New York City

Wall Street indexes faced headwinds after yields on Treasuries advanced, as traders monitored progress on the latest U.S. budget proposal. 

The S&P 500 index decreased 0.5%, and the Nasdaq Composite declined 0.6%, and investors fear that the Republican Party's pledge to be fiscally responsible with the nation's finances is just a slogan. 

The latest proposal in the U.S. House of Representatives is likely to cut several programs for low-income and unemployed people and divert the savings to pass on as tax cuts to the wealthy. 

Moreover, the budget is likely to expand the federal government debt by at least $3 trillion over the next ten years, breaking the Republican Party's promise to only approve spending cuts that are revenue neutral. 

In addition, Donald Trump repeatedly stressed while campaigning during the presidential election that his administration would lower prices at stores, end the Russia-Ukraine war in one day, and wipe off the entire federal government debt by the end of his second term. 

Wall Street indexes have rebounded from the lows in early April, and the S&P 500 index has erased losses of nearly 20% to rise above the flatline after the Trump administration was forced to pause sky-high import taxes for 90 days.

Despite the market's sharp and speedy rebound, trade-related uncertainties are likely to resurface as the U.S. and its key trading partners are far from an agreement.

Small manufacturing companies and retailers are likely to face the highest hurdles after the Trump tariffs go into effect as early as August, which could lead to higher prices at stores, fewer choices, and more bankruptcies. 

Households seeking deals on cheaper goods from abroad are likely to find fewer choices and higher prices, as direct shipments to consumers from China will be taxed, but retail chain stores will be spared from those taxes.

 

Commodities, Currencies, Indexes, Yields

The S&P 500 index decreased 0.5% to 5,910.96, the Nasdaq Composite edged down 0.3% to 19,083.61, and the Russell 2000 index declined 0.9% to 2,085.15.

The yield on 2-year Treasury notes edged higher to 4.01%, 10-year Treasury notes increased to 4.54%, and 30-year Treasury bonds advanced to 5.03%.

WTI crude oil increased $0.78 to $62.81 a barrel, and natural gas prices edged lower by $0.02 to $3.40 a thermal unit.

Gold increased by $16.09 to 3,306.50 an ounce, and silver edged up by $0.09 to $33.17.

The dollar index, which weighs the US currency against a basket of foreign currencies, decreased by 0.50 to 99.62 and traded at the lowest level since April 2022.

 

U.S. Stock Movers 

Target Corp. declined 2.2% to $93.50, and the big-box retailer reported weak quarterly results and lowered its annual outlook. 

In the quarter, the retailer earned $1.04 billion, or $2.27 per share, compared to $942 million, or $2.03 per share, a year ago. 

Revenue eased to $23.85 billion from $24.53 billion a year ago, and transactions across stores and online fell 2.4% from a year ago. 

Target estimated annual sales to decline in low single digits compared to the previous estimate of an increase of 1%. 

Lowe's Companies jumped 1.8% to $235.37 after the home improvement retailer reported better-than-expected first-quarter results. 

Revenue in the quarter eased to $20.9 billion from $21.4 billion, and comparable sales in the quarter decreased 1.7%. 

Toll Brothers Inc. increased 5.5% to $108.41 after the luxury homebuilder's earnings were ahead of market expectations. 

Revenue edged down to $2.74 billion from $2.84 billion, net income fell to $352.45 million from $481.62 million, and diluted earnings per share slipped to $3.50 from $4.55 a year ago.

The company delivered between 2,800 and 3,000 homes during the quarter, and the average price per home ranged between $965,000 and $985,000.

Palo Alto Networks dropped 5.2% to $183.90 after the cybersecurity company's forward-looking outlook fell short of market expectations. 

The company guided fourth-quarter revenue to be between $2.49 billion and $2.51 billion, compared to $2.19 billion, and diluted earnings per share between 87 cents and 89 cents, compared to $1.51 a year ago, respectively.

Take-Two Interactive Software dropped 4% to $227.95 after the video game developer proposed to raise $1 billion through a stock offering.