Nasdaq 100: Semiconductor Stocks Drop on New Tariff Threats and Weak Data

Wall Street Slips Midday as Weak Services Data and Trade Threats Pressure Sentiment

Stocks turned lower Tuesday afternoon after a disappointing read on U.S. services sector activity and renewed tariff rhetoric from President Trump pressured risk appetite. The S&P 500 was last down 0.3%, with the Dow off 0.4% and the Nasdaq shedding 0.3%, erasing early-session gains.

Does the ISM Services Miss Complicate the Fed’s Rate Path?

The ISM nonmanufacturing PMI for July slipped to 50.1 from 50.8, narrowly avoiding contraction. The report showed stalled order growth, weaker hiring, and higher input costs. Analysts flagged the data as another signal of softening momentum in the broader economy.

Alexandra Brown of Capital Economics said the print adds to the Fed’s challenge, as slowing activity is now colliding with stickier inflation. The prices paid index within the report rose to a new cycle high, reinforcing concerns that cost pressures haven’t fully eased.

Will Trump’s New Tariff Threats Hit Corporate Margins?

Investor concerns grew after Trump suggested he may impose “small” tariffs on pharmaceutical imports, with larger duties to follow, and floated similar actions against semiconductor products.

Tech stocks turned negative, with the Nasdaq under pressure and the ISM nonmanufacturing PMI for July down 1.5%.

Caterpillar fell 0.6% after warning tariffs could cost the company as much as $1.5 billion in 2025, highlighting the profit risks facing industrial names.

Which Sectors and Names Are Leading Declines?

Energy stocks led sector losses, down 1.1% as crude prices remained volatile. Consumer discretionary also lagged.

Yum Brands fell 4.9% after posting weaker-than-expected Q2 results, citing reduced consumer spending and margin pressure tied to trade duties.

Marriott International dropped 1.2% after cutting its full-year forecast on slower travel demand, pointing directly to the impact of higher costs on discretionary spending.

How Is Fed Policy Shaping Market Positioning?

Despite today’s weaker data, traders are leaning into Fed easing. CME’s FedWatch tool now shows an 89.2% probability of a September rate cut, up from 63.3% a week ago. This comes after softer jobs data last week and a shakeup at the Bureau of Labor Statistics, where Trump ousted the agency head. Market participants are also watching closely for Fed board nominations and further trade developments.

Midday Outlook: What Should Traders Monitor from Here?

With services sector data softening and tariff threats back in focus, equity markets face renewed downside risk. That said, expectations for policy easing remain a support.

Traders should watch for Fed commentary, inflation data due next week, and any updates on China trade talks, which Trump suggested could include a year-end meeting with President Xi if progress is made.

More Information in our Economic Calendar.