U.S. stocks ended lower on Tuesday as investors weighed the impact of tariffs after Yum Brands and other companies cited trade duties in their results or outlooks.
The U.S. trade deficit narrowed in June on a sharp drop in consumer goods imports, and the trade gap with China shrank to its lowest in more than 21 years.
In addition, a measure of activity in the U.S. services sector hit stall-speed in July, with businesses saying new import taxes are pushing costs higher.
Shares of KFC parent Yum Brands fell 5.1% after the company missed estimates for the second quarter, as steep trade duties restricted consumer spending.
Caterpillar warned U.S. tariffs would pose significant challenges in the second half of the year and cost it up to $1.5 billion in 2025, but its shares ended up 0.1%.
The comments come at the tail end of the U.S. second-quarter earnings season, in which about 80% of reports from S&P 500 companies are beating analyst profit expectations.
“If you look at results, they are trending above low-bar expectations,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis, Minnesota.
“The impact of tariffs remains a work in progress. We’re not seeing any meaningful impact on company profitability with tariffs. We do know, however, that they loom.”
The Dow Jones Industrial Average fell 61.90 points, or 0.14%, to 44,111.74, the S&P 500 lost 30.75 points, or 0.49%, to 6,299.19 and the Nasdaq Composite .IXIC lost 137.03 points, or 0.65%, to 20,916.55.
Trump on Tuesday said the U.S. could impose a “small tariff“ on pharmaceutical imports before increasing the rate subsequently. He also signaled an announcement on tariffs on semiconductors and chips in the “next week or so.”
“Today’s market action reflects investors that are merely in pause mode,” Sandven said, noting that the backdrop for equities remains constructive for the year.
The S&P 500 and Nasdaq hit a string of record highs recently, and the S&P 500 remains up 7.1% for the year so far.
In other results-related news, Marriott International cut its full-year forecast for revenue growth and profit and signaled slowing travel demand and economic uncertainties. Its stock closed up 0.2%.
While the earnings period is winding down, investors look forward to more key results on Wednesday, with both Walt Disney and McDonald’s due to report.
Advancing issues outnumbered decliners by a 1.27-to-1 ratio on the NYSE. There were 158 new highs and 67 new lows on the NYSE.
On the Nasdaq, 2,216 stocks rose and 2,365 fell as declining issues outnumbered advancers by a 1.07-to-1 ratio.
Volume on U.S. exchanges was 16.29 billion shares, compared with the roughly 18.33 billion average for the full session over the last 20 trading days.
