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Wall Street indexes fall, oil drops for fourth straight session

Wall Street indexes declined on Tuesday due to weaker-than-expected U.S. data. Equities in Europe, however, made gains. The U.S. service sector activity was flat in July, with no change in orders or employment and little improvement in the jobs market. This is a sign of the uncertainty surrounding the effects of Trump's tariff policies on businesses.

The U.S. Treasury yields recovered ground after the disappointing data.

The Dow Jones Industrial Average dropped 67.10, or 0.15% to 44,106.54. The S&P 500 declined 23.05, or 0.36% to 6,306.89. And the Nasdaq Composite was down 89.87, or 0.43% to 20,963.73.

Investors increased their bets that the Federal Reserve will act to support the world's biggest economy. The gold price rose, while oil prices fell on the back of rising OPEC+ supplies and concerns about weakening global demand.

U.S. stocks rallied Monday on the back of generally positive earnings and increased bets that the Fed will cut rates in September after last week's disappointing jobs report. The pan-European STOXX 600 Index edged up by 0.15%. Most regional bourses traded higher as well, echoing the strength in Asia, where MSCI’s broadest Asia-Pacific share index outside Japan closed at 0.77%. Diageo jumped 4.9% following its forecast of flat sales in 2026 despite U.S. Tariffs.

Amelie Derambure is a senior portfolio manager of Amundi. She said that the removal of uncertainty was one factor helping European markets. Even though the tariff rate may be higher than what European politicians or market participants would have hoped or expected.

The question is: Is bad news bad (economy slowing) or is it good (Fed moving toward rate cuts)? Mohit Kumar, a Jefferies strategist, said that the answer depends on whether or not bad data is being reported and what is priced in.

"A modest slowdown in the economy is good news, as the Fed should ease up more." A sustained and sharp increase in unemployment rates, however, would be a concern as it could affect growth and earnings.

The dollar index (which measures the greenback versus a basket including the yen, the euro and others) rose by 0.14%, to 98.76. Meanwhile, the euro was up 0.03%, at $1.1574.

CME Fedwatch says that the odds of a rate cut in September are now at 94%. This is up from 63% on July 28. The market participants expect at least two quarter point cuts before the end of the year.

The yield on 2-year bonds rose by 3.9 basis points, to 3.72% from 3.681% at the end of Monday. The news that Trump may fill a Fed governorship early heightened concerns about the politicization interest rate policy. Trump threatened again to increase tariffs on Indian goods above the 25% level announced by him last month because of its Russian oil purchases. New Delhi, however, called this attack "unjustified", and promised to protect its own economic interests.

The strategists of ING said that it is still unclear whether the primary goal of the secondary sanctions against India for its financing of Russia will be achieved. This move could be a way for the United States to increase its leverage over India, forcing it to open its economy up to agricultural imports and to commit to buying U.S.-made energy. The oil prices fell for the fourth consecutive day as concerns about economic growth and oversupply increased. Brent crude futures fell 1.48% to $67.74 a barrel, while U.S. crude dropped 1.55% to $65.26.

Investors are still waiting for results from Walt Disney and Caterpillar this week. The data released on Tuesday revealed that the eurozone's business activity grew slightly faster in July than it did in June but was still sluggish. Separate UK data showed that British companies recorded the largest decline in new orders for almost three years and cut staff by more than half in just six months. The data from Asia's largest economies shows resilience in the service sector. S&P Global's final services purchasing managers’ index (PMI), which measures the performance of the service sector in Japan, grew to 53.6 from 51.7 in the previous month. This was the largest increase since February. China's service sector expanded last month at the fastest rate in over a year. Gold prices at the spot market rose by 0.22%, to $3380.10 per ounce.

(source: Reuters)