Market has momentum wind at its back

The S&P 500 and Nasdaq Composite ran to new record highs on Friday, and they are poised to keep running at today’s open.

The S&P 500 futures are up 22 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 121 points and are trading 0.5% above fair value, and the Dow Jones Industrial Average futures are up 225 points and are trading 0.5% above fair value.

This positive disposition follows the weekend update that the Senate passed a procedural vote that will set up its version of the “One Big, Beautiful Bill” for a full Senate vote tonight. The Senate’s version, among other things, extends the 2017 tax cuts for all income levels and makes those cuts permanent; it starts Medicaid work requirements beginning in December 2026, phases out solar and wind tax credits beginning in December 2026, raises the SALT deduction cap to $40,000 for people making $500,000 or less for a 5-year period, after which it reverts to $10,000, and increases the debt ceiling by $5 trillion.

The CBO estimates this version of the bill will add $3.3 trillion to the deficit over the next decade. Perhaps the most remarkable development of the morning is that Treasury yields are lower following that forecast.

The 2-yr note yield is down one basis point to 3.73%, and the 10-yr note yield is down three basis points to 4.26%. The Treasury market’s calm is enabling the stock market to carry on.

In brief, there isn’t any bond vigilante pushback. That could be subject to change, but it is a relief factor at this juncture.

Other spots of relief today include Canada’s decision to remove its digital services tax, with an aim of renewing trade negotiations with the U.S.; the acknowledgment that large banks all passed the Federal Reserve’s stress test, paving the way for capital return plans; and chatter that other trade deals could be reached soon.

If the Senate passes its version of the bill, it will head to the House, which could vote on it as early as Wednesday. Approval there would have the bill on the president’s desk for signing by July 4.

Elsewhere, China’s official manufacturing PMI for June checked in at 49.7, marking the third straight month that gauge has been in contraction territory (i.e., under 50.0). That hasn’t fazed the stock market, though, which is running with some momentum wind at its back.

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Originally Posted June 30, 2025 – Market has momentum wind at its back