Markets fluctuate as economic concerns mount
U.S. stock indexes slipped Tuesday, with investors reacting to new signs of economic softness and the continued impact of President Trump’s trade policies. The S&P 500 dipped 0.3% in afternoon trading, while the Nasdaq composite dropped 0.5%. The Dow Jones Industrial Average bucked the trend slightly, inching up 32 points, or 0.1%.
The downturn followed a weaker-than-expected report on activity in the U.S. services sector, which includes transportation and retail. The report added to concerns that recent tariffs are dragging on economic growth. Still, hopes for interest rate cuts by the Federal Reserve and strong earnings from select firms helped cushion losses.
Mixed earnings reflect tariff pressures
Several companies reported disappointing earnings, citing the direct impact of tariffs on costs and margins. Edgewell Personal Care fell more than 22% after missing analyst expectations, blaming weak sun care demand and elevated tariff-related expenses. Caterpillar also reported lower profits due to rising manufacturing costs but managed a slight stock gain of 0.5%.
Tariffs featured prominently in the latest Institute for Supply Management survey, with service-sector businesses expressing concerns about added costs and project delays. Some businesses said they were deferring investment due to uncertainty, even as others dismissed the tariffs as more rhetoric than reality.
AI-driven firms fuel optimism
Despite broader concerns, companies tied to artificial intelligence continued to outperform. Palantir Technologies rose 6.8% after reporting strong earnings and boosting its full-year forecast. CEO Alex Karp credited AI leverage for the company’s rapid growth. Axon Enterprise jumped 16.1%, citing AI-enhanced efficiency in its public safety software as a driver of its better-than-expected quarter.
Meanwhile, American Eagle Outfitters fell 7.6%, retreating from gains made after President Trump weighed in on a debate surrounding one of its ads. Yum Brands also slid 3.3% following weaker-than-expected earnings from its restaurant brands, including KFC and Taco Bell.
Market outlook tied to Fed decision
The recent volatility underscores investor sensitivity to interest rate expectations. Following a disappointing jobs report last week, speculation has grown that the Federal Reserve may cut rates in September. Lower borrowing costs would make equities more attractive and provide support to the broader economy, though inflation risks remain.
Treasury yields have declined sharply since the jobs data was released. The yield on the 10-year Treasury dropped to 4.20%, down from 4.39% prior to the report. This move reflects rising bets on Fed rate cuts and growing caution about the economic outlook.
Global markets react to U.S. policy signals
European and Asian stock markets mostly posted gains. India’s Sensex, however, fell 0.4% amid concerns over trade tensions with the U.S., as Washington pressures New Delhi to reduce oil imports from Russia. The geopolitical backdrop continues to influence investor sentiment across markets, adding another layer of uncertainty to an already fragile environment.
