US Stock Market Today: S&P 500 & Nasdaq Drop 0.5% as Weak ISM Data and Tariff Threats Weigh on Markets

The US stock market today experienced a decline in morning trading, reversing earlier gains. As of 11:00 a.m. in New York, the S&P 500 and Nasdaq 100 each fell by 0.5%, while the Dow Jones Industrial Average decreased by 0.4%. This downturn followed the release of disappointing data from the US services sector.

The Institute for Supply Management (ISM) reported that its services index showed a slowdown in July, dropping to 50.1. This figure was below economists' expectations of 51.5 and indicates a deceleration in growth. A reading above 50 signifies expansion; however, this decrease has raised concerns about weakening economic momentum.

Adding to worries, the ISM’s prices paid sub-index rose to 69.9, a 2.75-year high. This implied that there is continued inflationary pressure within the services sector. Combined with weak jobs data from last week, the report dampened early optimism fueled by strong corporate earnings.

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Corporate Earnings and Buybacks Remain in Focus

Market sentiment was reflected by some robust earnings, despite Tuesday's pullback. Palantir Technologies was up more than 8% after surpassing revenue expectations, citing AI-related demand. Vimeo shares jumped 9.3% following an improved earnings forecast. In contrast, Hims & Hers Health declined 4.9% after missing revenue targets and reporting weak demand for weight-loss treatments.

Pfizer shares rose more than 5% after the company raised its profit forecast. The company cited cost-cutting efforts as a key factor in offsetting declining sales.

Bloomberg Intelligence noted that S&P 500 earnings have risen 9.1% in the second quarter, triple the pre-season forecast. Nonetheless, there were steep sell-offs of companies that delivered below expectations. Other stocks, such as Inspire Medical Systems and Gartner, dropped by more than 27% on updated revenue guidance.

With the ongoing earnings season, investors are watching corporate buybacks. Citadel Securities strategist Scott Rubner also pointed out that August has historically performed well in equities, particularly after the end of the earnings blackout periods. This figure can support equities in the near term.

Trade Tensions and Fed Rate Cut Speculation Build

Geopolitical developments and monetary policy also attracted the market's attention. President Trump stated that he would increase tariffs on goods from India because of its continued oil trade with Russia. He also signaled new tariffs on pharmaceutical and semiconductor imports, which may take effect in the coming week.

On the monetary front, San Francisco Fed President Mary Daly stated that the time for interest rate cuts is approaching. Following recent weak economic reports, futures markets now place a 92% probability on a 25-basis-point cut at the Federal Reserve’s September meeting.

Meanwhile, the US trade deficit decreased to $60.2 billion in June, the lowest over nearly two years. Analysts perceived this as positive input to calculating the second-quarter GDP, but it was not sufficient to outweigh economic uncertainty and risk due to tariffs.

Stocks are likely to be volatile as the market weighs earnings power against economic and trade headwinds.

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