U.S. stock indexes edged lower on Tuesday following fresh signs of economic weakness. The S&P 500 dipped 0.3% in the afternoon, pulling back after its best day since May, which itself followed its worst performance in months. The Dow Jones Industrial Average rose slightly by 32 points (0.1%) as of 1:16 p.m. ET, while the Nasdaq composite dropped 0.5%.
The decline was driven in part by a disappointing report on the performance of U.S. service industries — such as retail, transportation, and healthcare — raising fresh concerns that tariffs may be putting pressure on the economy. However, expectations for upcoming interest rate cuts by the Federal Reserve, alongside stronger-than-anticipated corporate earnings, helped soften the downturn.
One notable drop came from Edgewell Personal Care, which owns brands like Schick, Playtex, and Banana Boat. The company’s stock plunged 22.4% after reporting quarterly profits and revenue below analysts’ forecasts. CEO Rod Little blamed a weak summer sun-care season in North America and the negative impact of tariffs on margins.
Caterpillar’s shares fluctuated throughout the day but ended up 0.5% higher. Its quarterly earnings also missed expectations, with operating profit falling 18% from the prior year, mainly due to higher manufacturing costs tied to tariffs.
Many companies have been warning investors that tariffs will weigh on earnings in 2025. Trade tensions have become one of the most discussed topics in the latest services industry report compiled by the Institute for Supply Management.
One company in the healthcare sector noted, “Tariffs are causing additional costs… though we must continue with purchases, the rising expenses are forcing us to delay other projects.” A business in real estate and leasing said uncertainty remains a top concern, though “tariff talk has turned out to be more bluster than policy,” and many companies are now tuning out the noise.
Interestingly, the ongoing trade uncertainty hasn’t deterred investment in artificial intelligence. Palantir Technologies soared 6.8% after reporting stronger-than-expected profits and raising its full-year revenue outlook. The company’s stock has already doubled this year. CEO Alex Karp remarked, “We continue to see the astonishing impact of AI leverage.”
Axon Enterprise also saw a sharp rise, gaining 16.1% after reporting robust earnings and highlighting growth in its AI-powered tools, including transcription and data analysis software. The company raised its revenue forecast for the year.
On the downside, American Eagle Outfitters fell 7.6%, reversing some of its 23.6% gain from the previous day. The retailer recently made headlines for ads featuring actress Sydney Sweeney, sparking debate around beauty standards. Former President Donald Trump commented on the controversy, saying, “WOKE is for losers,” which added to the media buzz.
Yum Brands, which owns KFC, Taco Bell, and Pizza Hut, also declined 3.3% after slightly missing quarterly earnings estimates.
As the market continues climbing to record highs since rebounding in April, investors are demanding stronger profit performance to justify current valuations. If earnings growth slows, the market may rely on lower interest rates to sustain momentum.
The Federal Reserve’s next meeting in September could bring a rate cut, especially after last Friday’s weak jobs report intensified expectations. Lower rates could help stocks look more attractive and stimulate economic growth, though they also carry the risk of driving inflation.
Bond markets have responded with declining yields. The 10-year Treasury yield fell to 4.20% from 4.22% the previous day and down from 4.39% before the job data was released. It’s a notable move that reflects shifting economic sentiment.
Globally, most stock markets in Europe and Asia posted gains. However, India’s Sensex bucked the trend and slipped 0.4%, amid growing trade tensions with the U.S. over oil imports from Russia.
Also Read:
US Stocks Edge Toward Another Record After Trade Deal with Japan
Wall Street Rebounds as U.S. Stocks Regain Most of Friday’s Losses
