The U.S. Senate narrowly passed President Donald Trump’s tax-and-spending bill, and Vice President JD Vance cast the tie-breaking vote for a final count of 51-50. Republican Senators Thom Tillis, Rand Paul, and Susan Collins voted against the measure.
The bill now returns to the House for further consideration. The passage of the bill generated swift reactions from investors and financial markets. The bill includes sweeping changes to the tax code.
It aims to reduce tax rates for corporations and individuals. Markets and U.S. trading partners reacted quickly to the new rates. The changes reflect what Trump outlined in his April 2 announcement.
The stock market showed varied movements on Tuesday. Investors shifted their focus from technology stocks at the beginning of the second half of 2025. The Dow Jones Industrial Average rose significantly by 400.17 points, or 0.91%, ending at 44,494.94.
In contrast, the S&P 500 saw a slight decline of 0.11%, finishing at 6,198.01.
Senate passes tax overhaul bill
The Nasdaq Composite dropped 0.82% to settle at 20,202.89.
Traders opted for health-care stocks. Notable gains included Merck (up more than 4%), Pfizer (up more than 3%), and Johnson & Johnson (up about 2%). This shift is a departure from the tech-driven surge in the second quarter when the Nasdaq rallied nearly 23%.
Anthony Saglimbene, Ameriprise chief market strategist, noted, “For the last two months of the quarter, it was really risk-on. It was about buying stocks that had these really strong secular growth drivers like AI and technology. I think we’ve exhausted that trade.”
Electric vehicle maker Tesla saw its shares fall by 5%.
This followed President Donald Trump’s statement suggesting potential government scrutiny over the company’s subsidies. Federal Reserve Chair Jerome Powell confirmed current tariffs have prevented the Fed from reducing rates. He noted future decisions will depend on economic data at a conference in Portugal.
In effect, we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” Powell said. The stock market has made a remarkable recovery after steep declines in April due to Trump’s extensive tariff policies. The S&P 500 closed the second quarter with a 10.6% gain.
The Nasdaq was up nearly 18% over the period.
