Trump won't extend tariff negotiation deadline; Powell links rate cuts to tariffs; "Big and Beautiful" bill submitted; June EV delivery reports released.
U.S. Senate Passes "Big and Beautiful" Bill Amid Trade Tensions
On July 1, 2023, the U.S. Senate narrowly passed the "Big and Beautiful" bill with a vote of 51 in favor and 50 against. This legislation includes a $4.5 trillion tax cut and $1.2 trillion in spending reductions. The bill is now headed to the House of Representatives for a vote.
Trump on Tariffs and Trade Negotiations
President Trump stated he does not plan to extend the deadline for trade negotiations with other countries, set for July 9. He expressed skepticism about reaching an agreement with Japan and hinted at potentially imposing tariffs of "30%, 35%, or any number we decide" on Japanese imports, significantly higher than the previously announced 24%.
Israel Agrees to Ceasefire Conditions
On the same day, Trump announced that U.S. representatives had a "long and productive" meeting with Israel regarding the Gaza situation, with Israel agreeing to the conditions necessary for a 60-day ceasefire.
Powell's Stance on Interest Rates
Federal Reserve Chair Jerome Powell did not rule out the possibility of a rate cut in July, stating that the future economic outlook would dictate policy direction. He noted that concerns over tariffs could impact inflation and hinted at a potential shift in the Fed's rate-cutting strategy if summer employment data is weak.
Impacts of the "Big and Beautiful" Bill
Benefits for Chip Manufacturers
The Senate's version of the "Big and Beautiful" bill has faced criticism from the clean energy and electric vehicle sectors but offers benefits for chip manufacturers. If chip companies begin construction on new factories in the U.S. before the 2026 deadline set by the current chip legislation, they will qualify for a 35% investment tax credit, significantly higher than the existing 25%.
Clean Energy Sector Relief
The final version of the bill does not include new taxes on imported components for wind and solar projects, which had been proposed in earlier drafts. This omission is expected to save U.S. clean energy companies up to $7 billion over the next decade, leading to a rise in solar stocks.
Market Reactions
Mixed Performance of Major Indices
On the day of the bill's passage, major U.S. indices showed mixed results. The Dow Jones Industrial Average rose by 400.17 points (0.91%) to close at 44,494.94, while the Nasdaq fell by 166.84 points (0.82%) to 20,202.89. The S&P 500 dipped slightly by 6.94 points (0.11%) to 6,198.01.
Notable Stock Movements
In the tech sector, Tesla dropped 5.34%, Nvidia fell 2.97%, and Meta Platforms decreased by 2.56%. In contrast, Apple rose by 1.29%. The Philadelphia Semiconductor Index fell by 0.70%, with AMD down 4.08%.
Array Technologies and Wolfspeed Surge
Array Technologies saw a significant increase of over 12% following the bill's passage, while Wolfspeed's stock skyrocketed by over 98% after announcing a bankruptcy restructuring plan to reduce its debt by approximately 70%.
Retail Sector Strengthens
Retail stocks gained traction, with Kohl's rising over 8% and Target and Macy's both increasing by more than 5%. Reports indicate that the U.S. is seeking to reach a "principled agreement" on a few trade disputes before the deadline.
Banks Increase Dividends and Buybacks
Following the Federal Reserve's stress tests, major banks have announced increases in dividends and stock buybacks. JPMorgan raised its quarterly dividend from $1.40 to $1.50 and authorized an additional $50 billion in stock repurchases.
Electric Vehicle Sales Update
In June, BYD reported sales of 382,600 new energy vehicles, while Xiaomi delivered 25,000 units. Xpeng saw a 224% year-on-year increase in deliveries, and NIO delivered 24,925 vehicles, marking a 17.5% increase.
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