Tariff Woes and Sluggish U.S. Data Weigh on Wall Street, But Global Markets Advance

On August 5, 2025, Wall Street stock indexes declined as investors grappled with tariff concerns and weaker-than-expected U.S. economic data. The Dow Jones Industrial Average fell 0.14%, the S&P 500 dropped 0.49%, and the Nasdaq Composite lost 0.65%.

The U.S. services sector unexpectedly stagnated in July, with little change in orders and a further weakening in employment, even as input costs climbed. This highlighted the uncertainty surrounding the impact of President Trump's tariff policies on businesses. Investors also digested comments from companies like Caterpillar, which warned of a potential $1.5 billion hit from tariffs by 2025.

Despite the challenges in the U.S., equities in Europe and Asia notched gains. The pan-European STOXX 600 index edged up 0.15%, while MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.77% higher. Investors were buoyed by the removal of tariff uncertainty, even if the rates were higher than expected.

The U.S. dollar steadied as investors anticipated the Federal Reserve would act to support the world's largest economy. The odds of a September rate cut now stand at around 94%, up from 63% seen on July 28, with market participants expecting at least two quarter-point cuts by the end of 2025.