By Caroline Valetkevitch
NEW YORK (Reuters) – U.S. stocks closed lower on Tuesday as investors grappled with the impact of tariffs following disappointing results and outlooks from companies like Yum Brands. The U.S. trade deficit narrowed in June, with the trade gap with China reaching its lowest point in over two decades. However, a measure of activity in the U.S. services sector showed signs of slowing down in July due to rising costs from new import taxes.
Yum Brands, the parent company of KFC, saw its shares fall by 5.1% after missing estimates for the second quarter, citing the impact of trade duties on consumer spending. Caterpillar also warned that U.S. tariffs would present challenges in the second half of the year, potentially costing the company up to $1.5 billion by 2025.
Despite these concerns, the majority of S&P 500 companies have reported earnings that beat analyst expectations in the second quarter. Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, noted that while tariffs continue to be a concern, they have not had a significant impact on company profitability yet.
The Dow Jones Industrial Average fell by 61.90 points, the S&P 500 lost 30.75 points, and the Nasdaq Composite dropped by 137.03 points. President Trump hinted at the possibility of imposing tariffs on pharmaceutical imports and semiconductors in the coming weeks.
Sandven described the market action as investors being in a “pause mode,” emphasizing that the overall outlook for equities remains positive for the year. The S&P 500 and Nasdaq have recently hit record highs, with the S&P 500 up by 7.1% year-to-date.
In other news, Marriott International revised its full-year forecast downwards due to slowing travel demand and economic uncertainties. However, its stock closed slightly higher. Investors are now looking ahead to key earnings reports from Walt Disney and McDonald’s on Wednesday.
On the NYSE, advancing issues outnumbered decliners, with 158 new highs and 67 new lows. On the Nasdaq, declining issues slightly outnumbered advancers, with volume on U.S. exchanges totaling 16.29 billion shares.
Overall, while trade tensions and tariff concerns continue to linger, the market remains resilient with positive earnings reports and a strong performance in equities. Investors will closely monitor upcoming earnings releases and economic indicators for further insights into the market’s direction.
