05:23 PM EDT, 08/05/2025 (MT Newswires) -- US equities fell Tuesday as a report showed that activity in the services sector stalled, likely pointing to a weakening economy.

The Nasdaq Composite closed 0.7% lower at 20,916.6, while the S&P 500 fell 0.5% to 6,299.2. The Dow Jones Industrial Average dropped 0.1% to 44,111.7. Most sectors ended in the red, led by utilities, while materials saw the biggest gain.

The services sector edged down to 50.1 last month from 50.8 in June amid a slowdown in business activity and new orders, a survey by the Institute for Supply Management showed.

"It was a disappointing and ugly ISM services report for July," Scott Anderson, chief US economist at BMO, said in a report. "Stagflationary impacts already appear to be rocking the services sector to a greater extent than previously anticipated."

The ISM survey is deemed "bad news for the health of the economy as more than 80% of all jobs come from the services sector," according to Anderson.

Last week, ISM data showed that US manufacturing activity contracted at a faster rate month on month in July.

"The softer trend in ISM services, coupled with an even worse performance in its manufacturing counterpart, are indicative of slowing US economic activity -- a theme that we anticipate will become a more entrenched in the third quarter," TD Economics said in a report.

US Treasury yields were higher, with the two-year rate increasing 4.3 basis points to 3.73% and the 10-year rate adding 0.9 basis point to 4.21%.

The US trade deficit in June hit its lowest level since September 2023 as imports dropped, while the goods trade gap with China shrank to its smallest in more than 21 years, government data showed.

"We're getting very close to a deal" with China, US President Donald Trump said in a CNBC interview on Tuesday. "We're getting along with China very well."

Last week, the US and China concluded trade talks in Stockholm, Sweden. Trump must sign off on a potential extension of a tariff pause between the two sides, CNBC reported at the time, citing US negotiators.

The US will announce new tariffs on semiconductors and chips as soon as next week, Trump told CNBC.

Trump, meanwhile, has narrowed the list of Federal Reserve chair candidates to four, with US Treasury Secretary Scott Bessent not interested in the role, Trump reportedly said.

West Texas Intermediate crude oil was down 1.8% at $65.08 a barrel in Tuesday late-afternoon trade.

In company news, TransDigm Group ( TDG ) shares were down nearly 12%, among the steepest declines on the S&P 500, following a quarterly top- and bottom-line miss.

Axon Enterprise ( AXON ) shares jumped 16%, the best performer on the S&P 500. The company late Monday raised its full-year revenue guidance following a second-quarter beat.

Palantir Technologies ( PLTR ) was the second top gainer on the S&P 500, up 7.9%. The software maker late Monday posted second-quarter results that topped Wall Street's estimates as US sales soared.

Shift4 Payments' ( FOUR ) shares plunged 15% after the payments and commerce technology company reported weaker-than-expected second-quarter earnings and announced the departure of Chief Financial Officer Nancy Disman.

Novo Nordisk's ( NVO ) US-listed shares fell 3.3%. The Danish drugmaker's "rapidly" deteriorating growth profile amid continued mass compounding of obesity drugs in the US has prompted UBS to downgrade the stock to neutral from buy.

Gold was up 0.3% at $3,434.80 per troy ounce, while silver rose 1.4% to $37.87 per ounce.