Wall Street's main indexes swung to losses Tuesday after data showed U.S. services activity unexpectedly stalled and investors considered the impact of U.S. trade policies on corporate profits.
At 12:29 p.m. EST, the Dow Jones Industrial Average fell 31.49 points, or 0.07%, to 44,142.15, the S&P 500 lost 20.15 points, or 0.32%, to 6,309/79, and the Nasdaq Composite lost 83.75 points, or 0.40%, to 20,969.83.
ISM's nonmanufacturing purchasing managers index (PMI) slipped to 50.1 last month from 50.8 in June, as little changes in orders and weaker hiring, alongside rising input costs, highlighted persistent uncertainty from President Donald Trump's tariff policy.
Seven of 11 S&P 500 sub-sectors traded in the red, with a 1.1% drop in energy leading the declines.
"The ISM services survey highlights the challenges for the Fed in the coming months, with the activity and employment indicators weakening even as the prices paid index rose to a new cyclical high," said Alexandra Brown, North America economist at Capital Economics.
Caution also permeated after Trump signaled that the U.S. could soon slap a "a small tariff" on pharmaceutical imports before increasing the rate subsequently. The president also suggested announcing tariffs on semiconductors and chips in "next week or so."
The technology index was down 0.6% and the Philadelphia Semiconductor Index declined 1.5%.
Tariffs also took a bite out of major corporations' profits, with industrial bellwether Caterpillar warning of an up to $1.5 billion hit in 2025.
The construction and mining equipment maker slipped 0.6%.
KFC parent Yum Brands fell 4.9% after missing estimates for the second quarter, as steep trade duties restricted consumer spending.
Hotel operator Marriott International also fell prey to trade duties as it cut its annual forecast on slowing travel demand, sending its shares down 1.2%.
The losses succeeded Wall Street's climb on Monday as disappointing July jobs data and sharp downward revisions to prior months fueled expectations of a Federal Reserve interest rate cut in September.
As per CME Group's FedWatch tool, odds of a September cut stand at 89.2%, up sharply from 63.3% just a week ago - and market watchers are eyeing at least two quarter-point cuts by year-end.
Meanwhile, Trump's decision to fire the head of the Bureau of Labor Statistics, responsible for past jobs data, stoked investors' fears about the integrity of economic data.
Trump in a CNBC interview said he would "shortly" announce his pick for an open seat on the Federal Reserve's board of governors and possibly his nominee for Fed chair as well.
Meanwhile, Trump also hinted at progress toward a trade deal with China, suggesting a possible meeting with President Xi Jinping by this year's end if talks succeed.
Beyond Friday's jobs data jolt, Wall Street has stayed buoyant. Reflecting the market's upbeat mood, HSBC just boosted its S&P 500 year-end target by more than 800 points to 6,400, citing AI excitement and easing U.S. policy uncertainty.
Declining issues outnumbered advancers by a 1.17-to-1 ratio on the NYSE and by a 1.55-to-1 ratio on the Nasdaq.
The S&P 500 posted 32 new 52-week highs and six new lows, while the Nasdaq Composite recorded 58 new highs and 60 new lows.