The Republican-led upper congressional chamber narrowly cleared Trump’s mammoth domestic policy bill, sending the measure back to the house of representatives, where the vote is also expected to be close.
Equity market viewers have cheered the prospects of extending tax cuts while expressing misgivings about projections that the measure will add some US$3 trillion to the US national debt.
The Dow advanced Tuesday, while both the S&P 500 and Nasdaq retreated from records.
Earlier European markets had also ended mixed, while Japan’s Nikkei suffered a 1.2% drop after Trump threatened new levies on Japan over a row about the country accepting US rice exports.
“The next few days are going to be testing times for governments in many parts of the world as they try to hammer out trade deals with the US,” said Dan Coatsworth, an investment analyst at AJ Bell.
While few trade agreements have been reached so far, the week began with some optimism as Canada and the US agreed to restart trade talks after Ottawa scrapped a digital services tax contested by US tech giants.
Comments from Trump and some of his top officials also suggested the deadline was flexible, and that several pacts were nearly completed.
“We expect risk sentiment to remain shaky until a deal is agreed… investors are on pause for now and are waiting for concrete news before making their next move,” said Kathleen Brooks, research director at trading group XTB.
The dollar extended its retreat against the euro and other major currencies.
The Dollar Index, which compares the greenback to a basket of major currencies, fell 10.8% in the first half of the year, its steepest decline since the dollar became the global benchmark currency.
Investors increasingly expect the Federal Reserve to cut rates at least twice this year – with Trump having loudly criticised Fed chief Jerome Powell for not doing so sooner – and all eyes will be on US jobs data due this week.
Powell responded on Tuesday at a central bankers’ gathering in Portugal, insisting that the Fed must remain “completely non-political” to successfully pursue its strategy of financial and economic stability.
Among individual companies, Tesla fell 5.3% as the electric car company’s CEO Elon Musk sparred with Trump over the tax and spending bill.
After Musk lambasted the legislation as wasteful and misguided, Trump warned of retribution against Tesla and other Musk ventures.
“This high-profile feud introduces political risk,” Briefing.com said of the tiff.
“The personal nature of the conflict, amplified by Trump’s comments implying Tesla’s reliance on subsidies for survival, has sparked fears of broader policy shifts targeting Musk’s business empire. This political uncertainty undermines investor confidence.”