The Dow Jones Industrial Average staged a recovery on Thursday, bouncing back from a recent low following a midweek market decline. The rebound came as investors shifted focus away from concerns over rising U.S. government debt, which had rattled equity markets the previous day alongside surging bond yields.
On Wednesday, a spike in bond yields, driven by renewed fears about the ballooning federal debt, prompted a broad sell-off in equities. However, investor sentiment improved after Congressional Republicans succeeded in advancing President Donald Trump’s sweeping budget and tax reform legislation. While the bill is projected to add trillions to the national deficit over the next decade, markets responded positively to the legislative win.
Despite Thursday’s recovery, bond markets remain volatile. The 30-year Treasury yield continues to hover above 5%, while the 10-year yield stays elevated at over 4.5%. These persistently high yields are complicating the Trump administration’s strategy to offset the fiscal burden of tax cuts with low-cost borrowing. Compounding the issue, the Federal Reserve remains cautious about reducing interest rates amid concerns over potential economic fallout from ongoing trade policies, including tariffs.
In a positive economic signal, U.S. Purchasing Managers Index (PMI) data for May revealed a stronger-than-expected rise in business confidence. Both the Services and Manufacturing PMIs climbed to 52.3, up from April’s readings of 50.2 and 50.8 respectively, indicating a modest expansion in business activity.
Market Outlook:
The Dow tested its 200-day Exponential Moving Average (EMA) near 41,640 in early Thursday trading before regaining momentum and pushing back above the 42,000 level. While the broader trend remains bullish, recent volatility and pressure from bond markets have tempered short-term optimism for a sustained rally.
