U.S. stock markets declined modestly on Tuesday (August 5), as investors absorbed weaker-than-expected economic data and fresh comments on tariffs from President Donald Trump, fueling concerns about the health of the world’s largest economy.
At the close of trading, the S&P 500 fell 0.49% to 6,299.19 points, while the Nasdaq Composite dropped 0.65% to 20,916.55 points. The Dow Jones Industrial Average lost 61.90 points (0.14%) to settle at 44,111.74 points.
The decline followed the release of July’s ISM Services Index, which showed stagnation in the U.S. services sector — a key component accounting for nearly 70% of the U.S. economy. This lack of momentum has raised the specter of stagflation, a troubling economic scenario combining slow growth, high inflation, and rising unemployment.
The latest jobs report had already indicated a weakening labor market in recent months, adding to investors’ concerns that the U.S. economy may be entering a prolonged period of sluggish performance.
Market sentiment was further pressured by remarks from President Trump during an interview with CNBC. He revealed plans to introduce new tariffs targeting semiconductors and pharmaceutical products, arguing that these industries should be brought back onshore.
“We will announce tariffs on semiconductors and chips — that’s going to be a separate category — because we want them made in the U.S.,” Trump said, adding that a formal announcement is expected within the next week or so.
The announcement rattled tech and industrial stocks, as investors braced for potential disruptions in global supply chains and renewed trade tensions under the Trump administration.
Despite the broader market weakness, Palantir Technologies stood out as a bright spot, soaring 7.9% after reporting quarterly revenue that surpassed the $1 billion mark for the first time in the company’s history.
In contrast, Caterpillar posted underwhelming earnings, and its stock remained flat by the session close. Meanwhile, Eaton Corporation dropped 7% after issuing a disappointing forward outlook.
With growing uncertainty around macroeconomic trends and protectionist trade policies, analysts suggest that investors adopt a more cautious and selective approach to navigating the markets.
This includes favoring high-quality stocks with strong balance sheets, resilient earnings, and long-term growth potential — especially in defensive sectors or those positioned to benefit from structural economic shifts.
In this complex environment, discipline and a long-term mindset may be the most effective tools for preserving capital and achieving stable returns, despite short-term volatility.
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