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General Motors’ second-quarter profit took a sharp hit from mounting tariff costs, sending shockwaves through U.S. markets Tuesday as investors weighed whether the stock rally that powered indexes to new highs a day earlier has run out of steam.
The GM earnings report—showing a steep 32% plunge in core profit—came with a stark warning: the pain from tariffs isn’t over. And that reality landed hard on Wall Street.
Nasdaq Wavers Ahead of Big Tech Earnings
After Monday’s record-setting close, the Nasdaq Composite dropped 0.4%, while the S&P 500 edged down 0.1%. The Dow, more industrial-heavy, eked out a modest 0.1% gain.
Tech stocks, which have led the market’s charge this year, are now under the microscope. With earnings from Alphabet and Tesla due Wednesday, investors are bracing for what could be a reality check on AI-fueled optimism.
“There’s been a lot of sizzle in the tech sector,” said Maria Engel, senior equity strategist at Concord Bridge Capital. “But now we’re at the point where the market wants to see the steak.
GM Flags Tariff Blow as Q2 Profit Sinks
For GM, the numbers were sobering. The Detroit automaker reported that $1.1 billion in tariff-related costs dragged on its second-quarter results—part of a broader warning that the financial damage could deepen in Q3.
“This isn’t a one-time hit,” CFO Paul Jacobsen told analysts. “We’re expecting even more pressure as current tariffs remain in place and negotiations stall.”
Shares of GM fell over 4% following the release. The ripple effect was felt across industrials, with Lockheed Martin and RTX also sliding on weaker-than-expected reports. Tobacco giant Philip Morris saw its stock fall, too, despite beating revenue estimates—proof that earnings alone may not be enough in this environment.
Trade Tensions Cloud Outlook
The market’s mood is being shaped not only by corporate results but also by geopolitical uncertainty. As the White House’s self-imposed August 1 deadline for a new trade agreement looms, talks with key partners like India and the EU appear deadlocked.
“There’s a sense that we’re moving toward a more fragmented global trade environment,” said Arun Patel, global markets advisor at Atlas Strategy Group. “That’s creating a persistent undertow for multinational earnings.”
Investors are watching closely for any signs of movement. But with negotiations faltering and tariffs already in effect, patience is wearing thin.
Powell Walks Tightrope as Trump Applies Pressure
Adding another layer of intrigue: Federal Reserve Chair Jerome Powell’s Tuesday appearance. While his remarks largely focused on regulatory matters—expected during the pre-meeting blackout period—investors were listening for any subtext on trade-related economic risks.
The Fed is under increasing political pressure. President Trump has again floated the idea of Powell stepping down, an unprecedented suggestion that’s raised eyebrows in Washington and on Wall Street.
“It’s not Powell’s style to engage directly,” said Leah Monroe, policy analyst at Horizon Macro. “But the tension is unmistakable—and markets are reading between the lines.”
Looking Ahead: Reality Check for the Rally?
With valuations stretched and headlines shifting by the hour, investors are increasingly cautious. The bull run has been powered by AI enthusiasm and resilient earnings—but that narrative is now being tested.
All eyes turn to Alphabet and Tesla next. If they stumble, the broader rally may face a reckoning.
“This market has climbed a wall of worry,” said Engel. “But gravity still exists. And right now, tariff fallout and global trade gridlock are adding weight.”
