US stocks edged lower Tuesday as traders weighed fresh signs of economic weakness alongside new tariff threats from President Donald Trump. The S&P 500 fell 0.49% to close at 6,299.19, while the Nasdaq lost 0.65% to 20,916.55. The Dow dipped 61.90 points, or 0.14%, to 44,111.74.
The retreat came after Monday’s sharp rebound, which had followed a steep sell-off on Friday. This week’s volatility has been fuelled by mounting fears that the US economy may be heading into stagflation, a combination of slowing growth and sticky inflation.
Services index flatlines, stoking stagflation fears
The latest catalyst came from the ISM Services index, which barely registered growth in July, posting a reading of 50.1, below all economist estimates. Employment within the services sector contracted, while the prices-paid component jumped to its highest level since October 2022.
As services make up around 70% of the US economy, the weak data sparked concern that the recent slowdown in hiring may be spilling into broader activity.
Tariff talk returns as Trump targets chips and pharma
Compounding investor nerves, President Trump told CNBC that fresh tariffs on semiconductors and pharmaceuticals were imminent. “We’re going to be announcing on semiconductors and chips…within the next week or so,” he said, adding that the aim was to bring more production back to US shores.
Markets have already been unsettled by rising input costs, and the prospect of new tariffs added to the inflationary undertone of the day.
Winners and laggards
Among individual names, Palantir jumped 7.9% after announcing it had surpassed US$1bn in revenue for the first time. Eaton slumped 7% on weaker guidance, while Caterpillar ended flat after missing earnings expectations.
Australian outlook and global cues
The SPI 200 futures suggest a modest gain of 11 points at the open. Investors will be watching corporate results from AMP, News Corp, and REA Group, alongside several REITs and gold producer Emerald Resources.
Overseas, oil prices dropped 1.6% on reports Russia may propose an air truce with Ukraine, while New Zealand’s jobs data due this morning could set the tone for RBNZ policy.
