Stocks Slip as S&P and Nasdaq Retreat, Dow Holds Slight Gain

U.S. stocks ended mixed Tuesday, with the Dow Jones Industrial Average eking out a modest advance while the S&P 500 and Nasdaq Composite fell, as investors weighed soft small business hiring data, looming retail earnings, and an S&P credit rating reaffirmation that underscored fiscal risks.

At the closing bell, the Dow Jones Industrial Average rose 10.57 points, or 0.02%, to 35,200.15. The S&P 500 dropped 37.67 points, or 0.58%, to 4,520.00, while the Nasdaq Composite slid 226.50 points, or 1.50%, to 14,820.00.

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Retailers in Focus: Target and Lowe’s

Investors are bracing for a busy retail earnings week. Target reports Wednesday morning with sentiment at its lowest in years. Analysts expect a 21% drop in earnings per share and a 3% decline in same-store sales, pressured by tariffs, inventory adjustments, and an unsettled strategic focus between discretionary categories and essentials. Bank of America recently downgraded the stock to Underperform with a $93 price target, citing structural challenges against Walmart and Amazon.

Target CFO Jim Lee said earlier this year that the company’s wide earnings guidance range “reflects the expected impact of tariffs and heightened uncertainty regarding the economy and consumer spending”.

Meanwhile, Lowe’s will release results Wednesday, a day after rival Home Depot reported a rare earnings miss but reassured investors with signs of improving July traffic and steady guidance. Wall Street expects Lowe’s to post earnings of $4.65 per share and comps of +1.4%, though analysts caution its heavier DIY exposure could make sustaining momentum more difficult.

Data Shows Hiring Weakness

Investors digested fresh readings on small business alongside a busy retail earnings slate. The Bank of America Institute reported that small-business hiring fell for a third straight month, down 6.7% year over year in July on a three-month average, even as owners’ concerns about the quality of labor rose 31% from June, according to the NFIB. Within the hiring data, payments tied to construction and manufacturing rose 33% versus the 2024 average, while retail and services declined 17% and 8%, respectively. Tariff outlays stand out as a rising cost: among the subset of firms paying duties directly, payments to U.S. Customs were up 170% since January.

S&P Reaffirms U.S. Credit Rating

Beyond earnings, macro policy was in the spotlight after S&P Global Ratings reaffirmed the U.S. sovereign rating at AA+ with a stable outlook. The agency emphasized that record-high tariff collections—$28 billion in July—are helping stabilize federal finances, with revenues projected to exceed 1% of GDP in 2025.

“The stable outlook indicates our expectation that although fiscal deficit outcomes won’t meaningfully improve, we don’t project a persistent deterioration over the next several years,” S&P said.

Still, risks loom. Net government debt is expected to near 100% of GDP, while questions about institutional independence—including the Federal Reserve—could pressure creditworthiness over time.

The Bigger Picture

Tuesday’s session encapsulated the crosscurrents facing investors: slowing small business hiring, cautious consumer spending trends, and an evolving fiscal backdrop where tariffs are playing an increasingly central role. With earnings from major retailers set to land and fiscal debates intensifying, market volatility looks likely to persist into the back half of the week.