U.S. Stocks Slip as Weak Services Data Fuels Economic Worries
Published Time: August 6, 2025, 18:30 U.S. Eastern Time
U.S. stock markets edged lower on Tuesday after a weaker-than-expected report on services sector activity added fresh concerns about the economy. The downturn came despite optimism for potential Federal Reserve interest rate cuts and better-than-expected earnings from some major companies.
Mixed Day on Wall Street
The S&P 500 fell 0.5%, extending a volatile stretch that saw it swing from its worst day since May to its best. The Dow Jones Industrial Average slipped 61 points, or 0.1%, while the Nasdaq Composite lost 0.7%.
According to the latest data from the Institute for Supply Management (ISM), U.S. services sector activity—including transportation, retail, and other non-manufacturing industries—slowed more than economists had forecast. Analysts say the report heightened fears that tariffs imposed under President Donald Trump’s trade policies may be weighing on economic growth.
Despite the decline, the S&P 500 remains within 1.4% of its all-time high, thanks in part to a series of strong corporate earnings reports and mounting expectations that the Fed could cut interest rates as early as September.
Corporate Earnings Drive Individual Stock Moves
Shares of Edgewell Personal Care—maker of Schick, Playtex, and Banana Boat—plunged 18.8% after the company posted quarterly profit and revenue figures below Wall Street expectations. CEO Rod Little cited a “very weak” sun care season in North America and tariff-related cost pressures.
Other companies have also highlighted tariffs as a drag on profitability. One healthcare and social assistance company told ISM surveyors that tariff-related costs were forcing them to delay projects, while a real estate and leasing firm said much of the tariff debate was “more bluster than policy.”
AI Sector Remains a Bright Spot
While some industries struggle, the artificial intelligence sector continued to shine. Palantir Technologies gained 7.8% after reporting stronger-than-expected profits and raising its full-year revenue outlook. CEO Alex Karp said the company is “continuing to see the astonishing impact of AI leverage” on business operations.
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Similarly, Axon Enterprise—maker of Tasers, body cameras, and law enforcement software—jumped 16.4% after reporting robust earnings and citing growth in AI-powered tools that streamline tasks such as transcription.
Retail and Consumer Brands Under Pressure
American Eagle Outfitters shares fell 9.5%, erasing some of the previous day’s 23.6% rally, which came after Trump weighed in on an advertising controversy involving actress Sydney Sweeney. Some critics accused the brand of promoting narrow beauty standards, while Trump dismissed such concerns.
Yum Brands, parent company of KFC, Taco Bell, and Pizza Hut, dropped 5.1% after its latest earnings narrowly missed analyst forecasts.
Market Outlook and Fed Policy Expectations
The broader market’s recent rally has fueled concerns about high valuations. Analysts say companies will need to deliver stronger profit growth—or the Fed will need to lower interest rates—for stocks to remain attractive.
Market watchers have increased bets on a September rate cut, especially after Friday’s jobs report showed weaker-than-expected employment growth. Lower rates could boost economic activity and make equities more appealing, though they also carry the risk of reigniting inflation.
Bond yields remained subdued, with the 10-year Treasury yield easing to 4.19% from 4.22% on Monday and down from 4.39% before the jobs data.
Global Market Performance
Internationally, stock indexes rose across most of Europe and Asia, supported by positive corporate earnings and easing inflation trends.
India’s Sensex was a notable exception, slipping 0.4% amid trade tensions with the United States. Washington is reportedly pressing New Delhi to scale back its purchases of Russian oil, adding geopolitical uncertainty to the market.
Source: AP News – US stocks slip following the latest discouraging signal on the economy
