Stocks Edge Lower as Tariff Fears and Home Depot Outlook Weigh on Market

U.S. stocks drifted lower early Tuesday just after the opening bell as investor sentiment remained fragile following a mixed earnings report from Home Depot and renewed concerns about the broader economic impact of tariffs. At the opening bell, the major U.S. indices were modestly in the red, with the Nasdaq Composite leading declines.

The Dow Jones Industrial Average ticked down 3.27 points, or 0.01%, to 42,788.8. The S&P 500 fell 16.92 points, or 0.28%, to 5,946.68, while the Nasdaq Composite slid 82.12 points, or 0.43%, to 19,133.3. The small-cap Russell 2000 index also slipped 0.23%, shedding 0.48 points to 208.49.

The early weakness in equities comes as investors digested first-quarter results from Home Depot (HD), which delivered a nuanced picture of the state of the consumer and housing markets. The home improvement retailer reported revenue of $39.86 billion, up 9.4% year-over-year and ahead of Wall Street’s consensus of $39.31 billion. However, adjusted earnings per share missed expectations, coming in at $3.56 versus an estimated $3.60 — marking the company’s first EPS miss in five years.

Despite soft same-store sales and earnings shortfall, the stock rose 2.5% in premarket trading as the company reaffirmed its full-year guidance and emphasized price stability amid new tariffs. Home Depot said it would not pass on increased costs to consumers, a move aimed at preserving customer loyalty but one that could compress margins. CFO Richard McPhail confirmed the company would absorb tariff-related costs, prompting analysts to scrutinize Home Depot’s strategy for maintaining profitability.

Foot traffic at Home Depot stores fell 3.8% year-over-year, according to data from Placer.ai, aligning with broader retail trends. The company cited unseasonal weather and sluggish housing turnover as headwinds but noted an improving trend in U.S. comps from February to April.

Meanwhile, broader market sentiment was dampened by mounting concern over the economic fallout from tariffs, a theme underscored Monday by JPMorgan Chase CEO Jamie Dimon. Speaking at the firm’s Investor Day in New York, Dimon warned that “rising goods and supply costs could cause the stock market to decline,” highlighting that much of the tariff burden has yet to ripple through the system. He added that current valuations appear stretched and suggested a 10% market correction was possible if earnings guidance is revised lower across sectors.

While consumer price inflation data for April showed signs of moderation, economists anticipate that tariffs could reignite pricing pressures in the months ahead. Retailers such as Walmart have already flagged “unprecedented” cost increases and potential price hikes, while companies like General Motors and JetBlue have withdrawn full-year earnings guidance.

Investors are also watching Capitol Hill, where the House Ways and Means Committee is marking up a sweeping tax bill that could have long-term implications for corporate and individual tax rates. The proposed legislation — “The One Big Beautiful Bill” — seeks to extend provisions from the 2017 Tax Cuts and Jobs Act and would reduce federal tax revenue by an estimated $4 trillion over a decade, according to the Tax Foundation.

The combination of macro uncertainty, tariff impacts, and shifting fiscal policy is prompting caution among equity investors. Analysts say the market is increasingly sensitive to earnings quality and forward guidance, particularly in sectors exposed to consumer spending and housing.

Looking ahead, attention will turn to Lowe’s earnings report due Wednesday. The company faces heightened expectations following Home Depot’s relatively resilient performance in U.S. comps, and any divergence in trends could amplify volatility in retail and home improvement stocks.

As of Tuesday morning, investors remain on edge amid a growing chorus of warnings about downside risks.