U.S. stocks ended lower on Tuesday as investors weighed the impact of tariffs after a slew of companies cited higher duties in their earnings reports, and weaker-than-expected economic data dented their sentiment. All three major indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) declined 0.1% or 61.90 points to close at 44,111.74 points.   

The S&P 500 shed 0.5%, or 30.75 points, to end at 6,299.19 points. Utilities and tech stocks were the worst performers.

The Utilities Select Sector SPDR (XLU) lost 1.1%, while the Technology Select Sector SPDR (XLK) fell 0.8%. The Communication Services Select Sector SPDR (XLC) also declined 0.8%. Seven of the 11 sectors of the benchmark index ended in negative territory.

The tech-heavy Nasdaq slid 0.7%, or 137.03 points, to finish at 20,916.55 points.

The fear gauge CBOE Volatility Index (VIX) was up 1.88% to 17.85. Decliners outnumbered advancers on the NYSE by a 1.27-to-1 ratio. On the NYSE, there were 158 new highs and 67 new lows.

On the Nasdaq, a 1.07-to-1 ratio favored declining issues as 2,216 stocks hit new highs and 2,365 hit new lows. A total of 16.29 billion shares were traded on Tuesday, lower than the last 20-session average of 18.33 billion.

Weak Economic Data Reignite Slowdown Fears

The last few days were volatile for Wall Street, with stocks taking a hit once again on Tuesday as concerns grew over the economy’s health. New data suggest a slowing services sector, following the ISM Services index's flat reading in July. This raised fears of stagflation, given the weaker-than-expected jobs report released last week.

Stagflation refers to a situation in which inflation is high while employment levels are low. The services sector accounts for nearly 70% of the U.S. economy and a slowdown could signal potential economic challenges ahead.

This dented investors’ sentiment, dragging down all three major indexes.

Tariff Concerns Weigh on Markets

Trump signed an executive order on Friday and slapped hefty tariffs on dozens of trading partners of the United States that sent stocks tumbling. On Monday, investors set aside those fears and started the week on a high.

However, fears came haunting back after Trump told CNBC that tariffs on semiconductors and pharmaceuticals would soon be announced.

Also, several companies that reported earnings over the past week have warned that tariffs could pose major challenges in the second half and impact revenues.

On Tuesday, shares of Yum! Brands, Inc. ((YUM Quick QuoteYUM - Free Report) ), the parent company of KFC, declined 5.1% after it missed earnings estimates for the second quarter due to higher tariffs that prevented consumers from spending.

Yum! Brands reported second-quarter 2025 earnings of $1.44 per share, missing the Zacks Consensus Estimate of $1.45 per share. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Caterpillar Inc. ((CAT Quick QuoteCAT - Free Report) ) also missed earnings estimates for the second quarter and warned that tariffs are likely to hit the company hard in the second half of the year and cost up to $1.5 billion. Caterpillar reported second-quarter 2025 earnings of $4.72 per share, missing the Zacks Consensus Estimate of $4.88 per share. However, the company’s shares ended 0.1% higher.

Wall Street is going through the historically worst month for stocks. Data shows that August has been the worst month for the Dow since 1988 and the second-worst for the S&P 500 and the Nasdaq.

Economic Data

U.S. trade deficit narrowed 16% in June to $60.2 billion, more than analysts’ expectations, the Commerce Department's Bureau of Economic Analysis reported on Tuesday. The report said that the trade deficit narrowed due to a sharp decline in imports of consumer goods. Also, the trade gap with China shrank to its lowest level in 21 years.