Tariff Jitters And Fed-Cut Bets Split Markets At Midday

Introduction#

Wall Street’s early charge faded into a midday stalemate on Tuesday, 5 August 2025, as investors attempted to square a fresh wave of tariff threats with a growing conviction that the Federal Reserve will deliver its first rate cut as early as September. The initial pop at the open—fueled by overnight strength in energy names following BP’s earnings beat—gave way to rotation instead of wholesale risk-off selling. By 12:30 p.m. ET, the major benchmarks were flat to slightly lower, masking wide sector dispersion that is beginning to rival last month’s post-NFP whipsaws.

Market Overview#

Intraday Indices Table & Commentary#

The Dow Jones Industrial Average is the lone gainer at midday, buoyed by defensively bid industrial majors such as CAT and heavyweights BRK-B and UNH, whereas the S&P 500 and Nasdaq Composite are sagging under the weight of megacap technology names. According to Monexa AI’s consolidated Refinitiv tape, breadth on the New York Stock Exchange is mildly negative (46% of issues advancing), while volume on the Nasdaq remains above its 30-day average, a sign that active traders are fading rallies in growth stocks.

Volatility is inching higher but remains below the 50-day average: the CBOE Volatility Index (VIX) has added +0.86% intraday to 17.67, a notably muted move considering the magnitude of single-stock swings in technology and healthcare.

Macro Analysis#

Economic Releases & Policy Updates#

At 10 a.m. ET, the JOLTS job-openings series printed 8.55 million vacancies, the lowest since January, confirming Friday’s payroll disappointment. Minutes later, CME FedWatch probabilities for a 25-basis-point cut in September jumped to 68% from 42% yesterday, per Bloomberg calculations. Treasury traders promptly flattened the yield curve; the 2-year note slipped 6 basis points to 4.32%, while the 10-year hovered near 4.04%. Equity investors initially cheered easier-policy hopes, but enthusiasm cooled once White House tariff rhetoric dominated airwaves.

Global/Geopolitical Developments#

President Trump doubled down on tariff escalation during a morning appearance on CNBC, pledging levies of up to 250% on imported pharmaceuticals and promising an update on semiconductor duties “within 24 hours.” Reuters notes that the executive order covering a wider swath of countries is scheduled for publication on 7 August. Europe reacted quickly—EU Trade Commissioner Dombrovskis warned of "proportionate measures," sending Eurozone cyclicals lower and capping earlier gains in U.S. multinationals.

Commodities bucked global risk aversion: Brent crude advanced 0.9% to $86.80 following BP’s upbeat commentary on refined-product demand, while gold ticked up 0.4% to $2 292 as investors layered hedges against trade-driven inflation.

Sector Analysis#

Sector Performance Table#

Industrials lead thanks to fresh defense spending cues and upbeat machinery orders. Basic-materials strength is notable—Dow Inc. and DuPont are each adding more than three percentage points as traders anticipate tariff-linked reshoring of chemical supply chains. At the other end, Utilities sink −2.10%, pressured by climbing wholesale-power component costs and worries that tariff-induced inflation could offset the benefit of lower rates for heavily levered operators.

Sector Movers and Catalysts#

The Technology cohort, representing roughly 32% of S&P market cap, is down a full percentage point, masking outsized single-name pain. Advisory firm Gartner slumped nearly 28%—its worst session since 2008—after trimming full-year guidance despite beating Q2 consensus. Meanwhile, AI darling PLTR is sprinting to a record after exceeding $1 billion in quarterly revenue, highlighting the pocket-of-strength dynamic within the sector.

Communication Services is hampered by a 5.5% slide in PARA following a New York Times report that negotiations with a private-equity buyer stalled over regulatory concerns. The weight of mega-cap META (−0.98%) further dampens the group despite a rally in CHTR, whose shares are up alongside insider-buying disclosures.

Energy trades lower overall but remains bifurcated: integrated majors rally on earnings (BP +1.9%) while midstream names like OKE plunge more than five percent amid fears of higher steel input costs.

Company-Specific Insights#

Midday Earnings and High-Impact Movers#

Industrial bellwether CAT missed EPS estimates but topped revenue, blaming a potential $1.5 billion tariff hit for slashed margin outlooks. Yet the stock is fractionally higher as traders lean on management’s comments that AI-powered data-center spending is driving record orders for power-generation engines.

Energy heavyweight BP delivered a clean beat—$0.90 EPS versus $0.68 expected—and sweetened the pot with a $750 million share-buyback. Management told Bloomberg the company is “priced for mid-cycle” even as refined-product demand surprises to the upside. The stock’s 1.9% advance is cushioning the broader energy slide.

Defense contractor GD added 0.6% after the U.S. Navy awarded Bath Iron Works an extra DDG-51 destroyer. With backlog up 13.6% year on year, investors appear willing to look through headline tariff risks to the long-cycle nature of defense procurement.

In healthcare, biopharma name VRTX is off a staggering 18% intraday—its worst daily drawdown since 2016—after an FDA filing delay for its gene-editing therapy. The wipe-out has shaved nearly six points from the Nasdaq Composite alone, underscoring the benchmark’s sensitivity to concentrated positions.

Mid-cap public-safety equipment maker AXON continues its parabolic run, adding almost 16% after forecasting fiscal-year billings growth north of 30%. Management cited a wave of federal grants tied to the bipartisan Public Safety Modernization Act signed in June.

Elsewhere, payroll-software provider PCTY is flat despite a price-target hike to $232 at Piper Sandler; traders appear more focused on tomorrow’s guidance commentary amid slackening job-creation data.

Extended Analysis#

Intraday Shifts & Momentum#

Today’s tape is emblematic of a market stuck between policy cross-currents. Tariff escalation is a direct tax on corporate margins and, by extension, on growth-sector valuations already strained by rich multiples. Yet softer labor prints are stoking hopes of quicker monetary relief, compressing real yields and supporting longer-duration assets such as industrials with multi-year revenue visibility. The push-pull dynamic is evident in the performance gap between the Dow and Nasdaq: value-leaning cyclicals outperform while high-beta tech lapses.

Liquidity remains ample—aggregate NYSE and Nasdaq turnover is tracking 8% above the 30-day norm—yet the distribution shows skew toward macro hedges (volatility futures, commodity ETFs) rather than outright equity longs. Goldman Sachs’ prime brokerage desk flagged net selling of tech for a fourth consecutive session, the longest streak since March, while industrials saw their largest net inflow since the April jobs shock.

Options-market pricing corroborates the tale: one-month implied correlation on S&P constituents has dropped to 19% from 27% two weeks ago, per CBOE data, suggesting traders expect continued single-stock dispersion rather than an index-wide breakout. In other words, sector rotation—rather than broad de-risking—remains the path of least resistance.

Conclusion#

Midday Recap & Afternoon Outlook#

By the lunch bell, tariff headlines have rearranged the leaderboard but not upended the broader market trend. Industrials and Basic Materials enjoy genuine tailwinds—defense spend, supply-chain reshoring, and commodity reflation—while Technology and Communication Services confront valuation gravity amid policy uncertainty. The nuanced reaction to CAT and BP earnings underscores investors’ desire for concrete self-help levers—share-buybacks, cost control, backlog visibility—rather than blue-sky narratives.

Looking into the afternoon, traders will watch for: 1) any follow-through on President Trump’s promised semiconductor-tariff announcement, 2) Fed-speak from Chicago President Goolsbee at 2 p.m. ET, and 3) further positioning shifts ahead of tomorrow’s ISM Services release. Volume patterns suggest dip-buyers remain active underneath the surface, but with volatility grinding higher and index futures liquidity thin beyond the top-of-book, a headline-driven air-pocket remains the primary intraday risk.

Key Takeaways#

Investors should stay nimble, emphasizing names and sectors exhibiting operational leverage independent of tariff swings. Industrials, defense, and select chemicals offer pricing power and balance-sheet insulation, while mega-cap tech’s leadership looks fragile absent clearer policy guidance. For portfolio hedging, modest VIX exposure or commodity overlays may offer cost-effective insurance as the summer policy calendar moves into overdrive.