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Caterpillar ( CAT ) warns of tariff impact

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July's ISM nonmanufacturing PMI slipped to 50.1

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Indexes: Dow down 0.1%, S&P 500 down 0.5%, Nasdaq down

0.7%

(Updates close with volume, share moves)

By Caroline Valetkevitch

NEW YORK, Aug 5 (Reuters) -

U.S. stocks ended lower on Tuesday as investors weighed the

impact of tariffs after Yum Brands ( YUM ) and other companies

cited trade duties in their results or outlooks.

The U.S. trade deficit narrowed in June on a sharp drop in

consumer goods imports, and the trade gap with China shrank to

its lowest in more than 21 years.

In addition, a measure of activity in the U.S. services

sector hit stall-speed in July, with businesses saying new

import taxes are pushing costs higher.

Shares of KFC ( YUM ) parent Yum Brands ( YUM ) fell 5.1% after the

company missed estimates for the second quarter, as steep trade

duties restricted consumer spending.

Caterpillar ( CAT ) warned U.S. tariffs would pose

significant challenges in the second half of the year and cost

it up to $1.5 billion in 2025, but its shares ended up 0.1%.

The comments come at the tail end of the U.S. second-quarter

earnings season, in which about 80% of reports from S&P 500

companies are beating analyst profit expectations.

"If you look at results, they are trending above low-bar

expectations," said Terry Sandven, chief equity strategist at

U.S. Bank Wealth Management in Minneapolis, Minnesota.

"The impact of tariffs remains a work in progress. We're not

seeing any meaningful impact on company profitability with

tariffs. We do know, however, that they loom."

The Dow Jones Industrial Average fell 61.90 points,

or 0.14%, to 44,111.74, the S&P 500 lost 30.75 points, or

0.49%, to 6,299.19 and the Nasdaq Composite lost 137.03

points, or 0.65%, to 20,916.55.

Trump on Tuesday said the U.S. could impose a "small tariff"

on pharmaceutical imports before increasing the rate

subsequently. He also signaled an announcement on tariffs on

semiconductors and chips in the "next week or so."

"Today's market action reflects investors that are merely in

pause mode," Sandven said, noting that the backdrop for equities

remains constructive for the year.

The S&P 500 and Nasdaq hit a string of record highs

recently, and the S&P 500 remains up 7.1% for the year so far.

In other results-related news, Marriott International ( MAR )

cut its full-year forecast for revenue growth and profit

and signaled slowing travel demand and economic uncertainties.

Its stock closed up 0.2%.

While the earnings period is winding down, investors look

forward to more key results on Wednesday, with both Walt Disney ( DIS )

and McDonald's due to report.

Advancing issues outnumbered decliners by a 1.27-to-1 ratio

on the NYSE. There were 158 new highs and 67 new lows on the

NYSE.

On the Nasdaq, 2,216 stocks rose and 2,365 fell as

declining issues outnumbered advancers by a 1.07-to-1 ratio.

Volume on U.S. exchanges was 16.29 billion shares,

compared with the roughly 18.33 billion average for the full

session over the last 20 trading days.

(Additional reporting by Nikhil Sharma and Pranav Kashyap in

Bengaluru; Additional reporting by Twesha Dikshit; Editing by

Maju Samuel and Aurora Ellis)