Concerns Over Economic Slowdown Amid Weak July Service Sector Data
Trump: "Tariffs on Semiconductors and Pharmaceuticals to Be Announced Next Week"
The three major indices of the New York Stock Exchange in the United States were showing a downward trend in early trading on August 5 (local time). In addition to weak July service sector data, investor sentiment was dampened as President Donald Trump signaled the announcement of tariffs on semiconductors and pharmaceuticals next week.
As of 10:53 a.m. on this day at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average (Dow) was down 189.96 points (0.43%) from the previous trading day, standing at 43,983.68. The S&P 500 Index, which focuses on large-cap stocks, slipped by 33.69 points (0.53%) to 6,296.25, while the tech-heavy Nasdaq Index was trading at 20,931.29, down 122.29 points (0.58%).
By stock, Palantir, an artificial intelligence (AI)-based software company that surpassed $1 billion in quarterly revenue for the first time, was up 7.76%. Caterpillar, a U.S. heavy equipment manufacturer, was down 1.28% due to weak earnings. Nvidia and Tesla were showing declines of 1.66% and 0.94%, respectively.
On this day, the U.S. Institute for Supply Management (ISM) announced that the July Services Purchasing Managers' Index (PMI) was 50.1, down 0.7 points from the previous month (50.8). Although the reading remained above the baseline of 50, indicating continued expansion, it fell short of the market forecast of 51.5. This reflected the effects of inflation and reduced employment. The sluggishness in the service sector, which accounts for about 70% of the U.S. economy, raised concerns about a potential economic downturn.
Chris Senyek, investment strategist at Wolfe Research, said, "The path of interest rate policy remains uncertain, and the market is reacting very sensitively to economic indicators," adding, "There could be even more volatile trading in the latter part of the summer."
President Trump's remarks on tariffs also weighed on the market.
In an interview with CNBC's "Squawk Box" on this day, President Trump said, "We plan to announce a separate (tariff) category for semiconductors and chips," adding that the announcement would be made "next week or around then."
He also reaffirmed the plan to impose tariffs on pharmaceuticals. He stated that for pharmaceuticals, tariffs would start at a "small amount" and be raised to as much as 150% within one to one and a half years, and eventually up to 250%. This is higher than the previously announced 200% level.
The United States has already imposed separate tariffs by item, in addition to the reciprocal tariffs set to take effect from August 7. Currently, tariffs of 25% are imposed on automobiles and auto parts, and 50% on steel and aluminum. Additional tariffs on semiconductors and pharmaceuticals are also expected.
Investors are also paying attention to major corporate earnings announcements. After the market closes on this day, the results of Snap, AMD, and Rivian are scheduled to be released. According to market research firm FactSet, about 370 companies in the S&P 500 have reported earnings so far, and 81% of them have exceeded market expectations.
U.S. Treasury yields were mixed, staying near flat ahead of large-scale Treasury issuance by the Department of the Treasury. The 10-year U.S. Treasury yield, the global benchmark for bond yields, was at 4.19%, down 1 basis point (1bp=0.01 percentage point) from the previous session, while the 2-year U.S. Treasury yield, which is sensitive to monetary policy, was at 3.7%, up 2 basis points from the previous day.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
