The U.S. stock market ended Tuesday in a state of deep confusion, failing to determine a single direction. After a confident rebound on Monday, which interrupted a series of losses, the major indices could not hold their gained height: the S&P 500 and Nasdaq lost 0.3% each, while the Dow Jones hovered around the zero mark. The cause of such uncertainty was a whole cocktail of shockingly contradictory economic data, announced with unprecedented specificity regarding trade threats and ambiguous corporate reports.
The main source of confusion came from two reports on the state of the services sector, which painted diametrically opposite pictures. On one hand, the ISM business activity index unexpectedly plummeted to 50.1 points, practically stopping at the boundary between growth and decline. Respondents to the survey specifically pointed to the negative impact of 'widespread uncertainty due to tariffs,' reviving fears of stagflation. On the other hand, a competing index from S&P Global was revised upward to 55.7 points, showing the fastest expansion in business activity since the beginning of the year. This confusion was exacerbated by a large-scale revision of labor market data, resulting in the 'disappearance' of 258,000 jobs from the statistics, which led investors to more actively price in an imminent cut in the Fed's key rate and drove government bond yields to a three-month low.
The internal economic problems have been compounded by external pressures. While investors were previously concerned about the general uncertainty in trade wars, they are now faced with specific numbers. President Trump announced new tariffs within a week, detailing that tariffs on pharmaceuticals could rise to 250%, the European Union could face tariffs of 35%, and India has come under threat for purchasing Russian energy resources. Such specifics sharply raise the stakes and make the trade conflict much more tangible for the markets.
Against this backdrop, the corporate sector also showed a lack of unity. Individual success stories, such as the 7.3% rise in Palantir's stock following an upward revision of revenue forecasts and a 5% increase in Pfizer's stock thanks to a strong report, coexisted with notable failures. For instance, Vertex Pharmaceuticals' shares plummeted by 19% after the announcement of the cessation of trials for a promising drug, which once again highlighted the heterogeneity of the situation at the micro level.
As a result, the market continues to await decisions from the Fed and the administration. On one hand, there are clear signs of an economic slowdown and very specific trade risks. On the other hand, there are individual growth points and hopes that the Fed will intervene and ease policy. The coming weeks will show which of these trends will prove stronger and can pull Wall Street out of its state of uncertainty.
