Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) opened Tuesday’s trading session in the green. However, the ETFs were unable to sustain their gains and closed in negative territory.
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Kicking off the morning news was June’s U.S. trade deficit, which fell by 16% month-over-month to $60.2 billion, ahead of the consensus estimate of $61.0 billion. Exports fell by 0.5%, while imports dropped by 3.7%. A narrower trade deficit helps increase GDP because imports are subtracted from the calculation and exports are added. Second quarter GDP is expected to rise by 3.0% compared to a 0.5% decline during the first quarter.
While a falling trade deficit is good news, the ISM Services Purchasing Managers’ Index (PMI) reading for July wasn’t. The index registered at 50.1, below the estimate for 51.5 and falling from 50.8 in June. A PMI above 50 indicates expansion, while a PMI below 50 indicates contraction. With that in mind, the Services PMI is dangerously close to stagnating and falling into contraction. Despite the recent weakness, the index has expanded in 12 of the last 13 months.
Meanwhile, President Trump has threatened to eventually place an eye-watering 250% tariff on pharmaceutical imports to the U.S. “We’ll be putting an initially small tariff on pharmaceuticals, but in one year — one and a half years, maximum — it’s going to go to 150%,” Trump said in a CNBC interview on Tuesday. “And then it’s going to go to 250%, because we want pharmaceuticals made in our country.” Pharmaceutical companies have warned that Trump’s trade policies could result in lower research and development spending and put patients at risk.
On top of that, President Trump is also considering imposing sanctions on Russia’s “shadow fleet” of oil tankers, according to the Financial Times. These sanctions would take effect if Russia fails to reach a ceasefire with Ukraine by Friday, August 8 and would mark Trump’s first penalties against the country during his second term. Trump has also threatened to impose 100% secondary tariffs on Russia if it is unable to reach a ceasefire by August 8.
The S&P 500 (SPX) closed with a 0.49% loss while the Nasdaq 100 (NDX) fell by 0.73%.
