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Indexes down: Dow 0.27%, S&P 500 0.54%, Nasdaq 0.64%

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Caterpillar ( CAT ) profit falls on weak equipment demand, tariff

hit

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July's ISM nonmanufacturing PMI slipped to 50.1

(Updates with analyst comment, early afternoon prices)

By Nikhil Sharma and Pranav Kashyap

Aug 5 (Reuters) -

Wall Street's main indexes swung to losses on Tuesday after

data showed U.S. services activity unexpectedly stalled and

investors considered the impact of U.S. trade policies on

corporate profits.

At 11:39 a.m. ET, the Dow Jones Industrial Average

fell 121.13 points, or 0.27%, to 44,052.51, the S&P 500

lost 34.47 points, or 0.54%, to 6,295.47 and the Nasdaq

Composite lost 135.41 points, or 0.64%, to 20,918.17.

ISM's nonmanufacturing purchasing managers index (PMI)

slipped

to 50.1 last month from 50.8 in June, as little changes in

orders and weaker hiring, alongside rising input costs,

highlighted persistent uncertainty from President Donald Trump's

tariff policy.

Seven of 11 S&P 500 sub-sectors traded in the red, with

a 1.1% drop in energy leading the declines.

"The ISM services survey highlights the challenges for

the Fed in the coming months, with the activity and employment

indicators weakening even as the prices paid index rose to a new

cyclical high," said Alexandra Brown, North America economist at

Capital Economics.

Caution also permeated after Trump signaled that the

U.S. could soon slap a "

small tariff

" on pharmaceutical imports before increasing the rate

subsequently. The president also suggested announcing tariffs on

semiconductors and chips in "next week or so".

The technology index was down 0.6% and the

Philadelphia Semiconductor Index declined 1.5%.

Tariffs also took a bite out of major corporations'

profits, with industrial bellwether Caterpillar ( CAT ) warning

of an up to $1.5 billion hit in 2025.

The construction and mining equipment maker slipped

0.6%.

KFC ( YUM ) parent Yum Brands ( YUM ) fell 4.9% after missing

estimates for the second quarter, as steep trade duties

restricted consumer spending.

Hotel operator Marriott International ( MAR ) also fell prey

to trade duties as it cut its annual forecast on slowing travel

demand, sending its shares down 1.2%.

The losses succeeded Wall Street's climb on Monday as

disappointing July jobs data and sharp downward revisions to

prior months fueled expectations of a Federal Reserve interest

rate cut in September.

As per CME Group's FedWatch tool, odds of a September

cut stand at 89.2%, up sharply from 63.3% just a week ago - and

market watchers are eyeing at least two quarter-point cuts by

year-end.

Meanwhile, Trump's decision to fire the head of the Bureau

of Labor Statistics, responsible for past jobs data, stoked

investors' fears about the integrity of economic data.

Trump in a CNBC interview said he would "shortly" announce

his pick for an open seat on the Federal Reserve's board of

governors and possibly his nominee for Fed chair as well.

Meanwhile, Trump also hinted at progress toward a trade deal

with China, suggesting a possible meeting with President Xi

Jinping by this year's end if talks succeed.

Beyond Friday's jobs data jolt, Wall Street has stayed

buoyant. Reflecting the market's upbeat mood, HSBC

just boosted

its S&P 500 year-end target by more than 800 points to

6,400, citing AI excitement and easing U.S. policy uncertainty.

Declining issues outnumbered advancers by a 1.17-to-1

ratio on the NYSE and by a 1.55-to-1 ratio on the Nasdaq.

The S&P 500 posted 32 new 52-week highs and six new

lows, while the Nasdaq Composite recorded 58 new highs and 60

new lows.