US stocks close lower on more tariff threats, data showing prices up and employment down
U.S. stocks closed lower after data showed a jump in prices and a decline in employment and President Donald Trump threatened more tariffs.
The Institute for Supply Management's service-sector price index in June hit its highest level since October 2022, while the employment index declined. The employment index showed a contraction for the fourth month in five.
"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 research firm Capital Economics.
James Knightley, chief international economist at Dutch bank ING, said the data continues to build a case for a Federal Reserve rate cut. The CME FedWatch tool, which tracks the odds the market gives for a rate move at each Fed meeting, shows a more than 91% chance for a cut at the Sept. 16-17 meeting. Last week, the odds were only in the 60%-range.
The blue-chip Dow fell 0.14%, or 61.90 points, to 44,111.74; the broad S&P 500 fell 0.49%, or 30.74 points, to 6,299.20; and the tech-heavy Nasdaq shed 0.65%, or 137.03 points, to 20,916.55. The benchmark 10-year Treasury yield was unchanged at 4.198%.
The stock market's moves come after starting the week with its largest daily percentage gain since May 27 on hopes for a Fed rate cut soon and easing trade relations.
Investors are also digesting more tariff threats from Trump on India, pharmaceuticals and semiconductors and earnings reports.
Meanwhile, software analytics firm Palantir reported better-than-expected quarterly results, but restaurant chain Denny's and Hims & Hers Health posted disappointing results. Before the opening bell, Pfizer and DuPont reported strong results; Caterpillar's quarter was mixed and Yum Brands' second-quarter results were disappointing.
Tariff news
Trump said in a CNBC interview he would announce tariffs on pharmaceuticals and semiconductors "within the next week or so."
"We'll be putting an initially small tariff on pharma, but in one year, one-and-a-half years maximum, it's going to go to 150% and then it's going to go to 250%," he said. "We want pharmaceuticals made in our country."
He also said he plans to raise the 25% tariff on India because the country continues to buy Russian oil. “I think I'm going to raise that very substantially over the next 24 hours because they are buying Russian oil, they are fueling the war machine," he said.
Separately, Switzerland’s President Karin Keller-Sutter and Economy Minister Guy Parmelin will come to the United States for trade talks, hoping to lower President Donald Trump's 39% tariff.
Who will be the new Fed chair?
Trump said in his CNBC interview he has narrowed the field to four people, and none are Treasury Secretary Scott Bessent. Some investors had speculated Bessent could take the helm at the Fed when Fed Chair Jerome Powell's term ends in May, but Trump said Bessent took himself out of the running.
Former Governor Kevin Warsh and National Economic Council director Kevin Hassett are among the contenders. Both have, like Trump, advocated to cut rates.
He did not say whom he was considering to replace Fed Governor Adriana Kugler, who abruptly announced her resignation last week before her term ends.
Corporate news
- Palantir's fiscal third-quarter results beat analysts' forecasts, with revenue surpassing $1 billion for the first time. The software analytics provider also lifted its full-year sales outlook. Shares gained 7.85%.
- TASER maker Axon beat second-quarter estimates and boosted its annual sales outlook on security needs. Shares jumped 16.41%.
- Marriott International cut its annual forecast on slowing travel demand. Shares closed slightly higher.
- Staar Surgical agreed to be bought by Alcon for $28 per share in cash. Staar shares soared 46.13%.
- Pfizer reported stronger-than-expected second-quarter results and lifted its full-year adjusted earnings per share outlook. Shares rose 5.18%.
- DigitalOcean reported better-than-expected second quarter results and raised its full-year guidance. The stock soared 28.88%.
- Caterpillar missed second-quarter profit estimates as tariffs took a big bite out of its margins. It now sees its full-year adjusted operating profit margin at the bottom of its target range. The machinery maker's stock rose fractionally.
- Coinbase sold $2 billion in convertible senior bonds. Shares of the crypto exchange dropped 6.34%.
- Hims & Hers Health missed second-quarter estimates and guided for below-forecast third-quarter results. Shares slid 12.36%.
- Inspire Medical reported second-quarter results that topped Wall Street forecasts but slashed is full-year outlook. Shares tumbled 32.35%.
- DuPont's second-quarter results beat forecasts. The chemicals giant also raised its full-year guidance. Shares added 2.38%.
- Eaton topped second-quarter forecasts but cut its current quarter guidance below Street views. Shares of the power management firm lost 7.36%.
- Yum Brands, owner of Taco Bell and KFC, missed second-quarter forecasts. Shares shed 5.1%.
- Vertex Pharmaceuticals topped second-quarter estimates but warned it won't progress its next-generation pain treatment, VX-993, after the painkiller failed to meet its primary endpoint in Phase 2. Shares tumbled 20.6%.
- Denny’s earnings fell below Wall Street’s expectations and same-store sales dropped in the second-quarter amid continued worries about U.S. consumer spending. Shares fell 2.75%.
Cryptocurrency
David Bailey, Bitcoin adviser to Trump, wants to raise $200 million for a political action committee to advance Bitcoin’s interests in the United States. He said he wants to use the PAC to send Bitcoin to $10 million.
Bitcoin was last down 1.13% at $113,821.20.
This story was updated with new information.
Medora Lee is a money, markets, and personal finance reporter at Paste BN. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.