Wall Street Suffers Losses Amidst Economic Data and Tariff Concerns – July 31,2024 – U.S. stock markets closed lower on Wednesday, July 31, 2024, as investors reacted to weaker-than-expected economic data and renewed trade anxieties sparked by former President Donald Trump’s proposed tariffs. The Standard & Poor’s (S&P) 500 index finished at 20,916.55, a decrease of 137.03 points, representing a 0.65% decline. This followed a 30.75-point (0.49%) drop from the previous trading day.
The Institute for Supply management (ISM) reported a Purchasing Managers’ index (PMI) reading of 50.1 for July, a decrease from 50.8 in June.This figure fell short of market expectations of 51.5. The PMI is a key indicator of economic activity in the manufacturing sector; a reading above 50 indicates expansion, while a reading below 50 suggests contraction.
Contributing to concerns about inflation, the ISM’s price index rose to 69.9, a 2.4-point increase from the previous month. This marks the highest level since October 2022, when it reached 70.7, signaling critically important upward pressure on the costs of raw materials and services. the price index reflects the percentage of purchasing managers reporting higher prices for commodities.
The service sector, which constitutes approximately 70% of the U.S. economy,has been a key driver of economic growth. While the manufacturing PMI has indicated a contraction, the stock market had previously benefited from the continued strength of the service sector. A slowdown in service sector activity could remove a crucial pillar supporting market gains. Recent data from the Bureau of Economic Analysis (BEA) showed the service sector contributing 2.7% to the second quarter GDP growth of 2.4%.
Some profit-taking occurred following gains the previous day, potentially influenced by anticipation of the July non-farm employment report, scheduled for release on August 2, 2024, by the Bureau of Labor Statistics (BLS). Analysts at Goldman Sachs predict the report will show 180,000 jobs added and an unemployment rate of 3.7%.
Adding to market uncertainty,former President Trump announced plans to impose tariffs on semiconductors and pharmaceuticals during a campaign rally in Manchester,New hampshire,on July 31,2024. He stated an initial “small” tariff would be levied on medicines, escalating to 150% within a year or a year and a half, and ultimately reaching 250%. These proposed tariffs target key industries with significant international supply chains, particularly impacting companies like Intel (semiconductors) and Pfizer (pharmaceuticals).