[New York Stocks Fall Across the Board on Weak Service Sector Data and Looming Semiconductor Tariffs]

Concerns Over Economic Slowdown Amid Weak July Services Data
Trump: "Semiconductor and Pharmaceutical Tariff Announcement Next Week"

All three major U.S. stock indexes closed lower on August 5 (local time) in New York. Concerns about an economic slowdown resurfaced due to weak July services data, and investor sentiment was dampened after President Donald Trump signaled that he would announce new tariffs on semiconductors and pharmaceuticals next week.

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On this day, the Dow Jones Industrial Average, which is focused on blue-chip stocks, closed at 44,111.74, down 61.9 points (0.14%) from the previous trading day. The S&P 500, which is centered on large-cap stocks, fell 30.75 points (0.49%) to close at 6,299.19, while the tech-heavy Nasdaq dropped 137.03 points (0.65%) to finish at 20,916.55.

On August 1, stock prices had risen as hopes for a September rate cut increased due to worsening employment data. However, the market turned bearish just one day later, weighed down by disappointing services data. The U.S. Institute for Supply Management (ISM) reported that the July Services Purchasing Managers' Index (PMI) fell 0.7 points from the previous month to 50.1. While this remains above the baseline of 50, indicating continued expansion, it was below market expectations of 51.5. Weakened demand and rising costs also led to a contraction in services sector employment. Since the service sector accounts for about 70% of the U.S. economy, the weak services data reignited concerns about a potential recession.

Neil Dutta, Managing Director at Renaissance Macro Research, explained, "If employment is slowing, it is hard to expect inflationary pressures to persist. Household demand is not strong enough to absorb rising prices. This is why preemptive rate cuts are desirable."

President Trump's comments on tariffs also weighed on the market.

In an interview with CNBC's 'Squawk Box,' President Trump stated, "We will be announcing a separate (tariff) category for semiconductors and chips," adding that the announcement would come "next week or thereabouts." He also reaffirmed plans to impose tariffs on pharmaceuticals. Regarding pharmaceuticals, he said that tariffs would start at a "small amount" and could rise to as much as 150% within a year to a year and a half, and eventually up to 250%. This is even higher than the previously announced 200%.

Separately from the reciprocal tariffs set to take effect from August 7, the U.S. has already implemented item-specific tariffs. Currently, automobiles and auto parts are subject to a 25% tariff, while steel and aluminum face a 50% tariff. Tariffs on semiconductors and pharmaceuticals are also expected to be added.

On Wall Street, there are predictions that market volatility could remain elevated for the time being.

Chris Senyek, Chief Investment Strategist at Wolfe Research, said, "The path of rate policy remains uncertain, and the market is highly sensitive to economic data. Trading could become even more unstable in the latter part of the summer."

Terry Sandven, Chief Equity Strategist at US Bank Asset Management, commented, "Although the market showed some decline today, equities have performed well overall. For the time being, we could see a sideways market, with so-called corrections and recoveries repeating. Valuations are clearly high, and this is not a cheap market."

Investors also paid attention to major corporate earnings released on this day. According to market research firm FactSet, about 370 S&P 500 companies have reported earnings so far, with 81% surpassing market expectations. After the market closed, results from Snap, AMD, and Rivian were released.

U.S. Treasury yields are rising, especially for short-term bonds. The benchmark 10-year Treasury yield remained at 4.2%, the same as the previous trading day, while the 2-year Treasury yield, which is sensitive to monetary policy, rose 3 basis points (1bp = 0.01 percentage point) to 3.72%.

By stock, Palantir, an AI-based software company that surpassed $1 billion in quarterly revenue for the first time, rose 7.85%. Caterpillar, a U.S. heavy equipment manufacturer, gained 0.12% despite disappointing earnings. Nvidia fell 0.97%. On this day, the U.S. Department of Justice announced that it had arrested two Chinese nationals for illegally exporting Nvidia's advanced AI chip 'H100' to China via a California-based company, in violation of U.S. export controls. Microsoft declined 1.47%, while Apple dropped 0.21%.