Wednesday was a mixed bag for stocks.
After the tech-heavy Nasdaq hit a record on Tuesday, the index closed down less than 1 point but failed to reach its second-straight record, while the Dow and the S&P 500 both gained ground on Wednesday.
Wednesday’s lackluster trading session, however, occurred against a backdrop of plenty of commentary on the economy for investors to digest.
Federal Reserve chair Jay Powell appeared on Capitol Hill for a second day while President Trump’s chief economic advisor Larry Kudlow said at CNBC’s Delivering Alpha conference that Trump is “doing exactly the right thing” on trade.
On Thursday, the economic schedule brings investors the weekly report on initial jobless claims and the Philadelphia Fed’s July reading on manufacturing activity.
And on the earnings side, notable companies expected to report results include Dow members Microsoft (MSFT) and Travelers (TRV), as well as Bank of New York Mellon (BK), Capital One (COF), Philip Morris (PM), and Fifth Third Bancorp (FITB).
Microsoft’s earnings will likely serve as the day’s highlight, as the stock has seen a 22% year-to-date gain to trade just below a record high. Wall Street analysts are looking for the company to report earnings per share of $1.08 on revenue of $29.2 billion, according to estimates from Bloomberg.
The tariff book
On Wednesday, the Federal Reserve released its latest Beige Book report, a collection of economic anecdotes from each of the central bank’s 12 districts.
This report helps form the basis of the Fed’s economic discussion that will take place at its next policy meeting, which begins on July 31.
And the big takeaway from Wednesday’s release is that across the country, businesses are worried about tariffs.
Business contacts in each of the Fed’s 12 districts brought up the impacts of tariffs, with the concerns ranging from these trade actions muddying the economic outlook for the second half of the year to some companies losing business to international competitors as a result of these actions.
In the New York Fed’s district, “A number of manufacturing contacts remarked that tariffs have raised their costs. Moreover, uncertainty about future trade policy was cited as a major concern, particularly in parts of upstate New York, where there is substantial trade with Canada.”
Contacts in the Philly Fed region said, “One machinery manufacturer noted that the effects of the steel tariffs have been chaotic to its supply chain–disrupting planned orders, increasing prices, and prompting some panic buying.”
In the same district, auto dealers that sales were a little better than the prior year in May and June, though, “dealers noted greater downside risk than normal for the second half of this year, including disruptions from tariffs, volatile markets, and rising interest rates.”
From the Richmond Fed’s district, “a Maryland can manufacturer said he could not get the quality of steel needed domestically and anticipated losing business to foreign competitors who are not faced with steel tariffs.”
Things were slightly more upbeat in the Atlanta Fed’s region, with contacts there saying that, “Although a number of contacts’ sentiment declined due to uncertainty related to the impact of tariffs and tariff rhetoric, the overall outlook among businesses remains positive as most expect an increase in activity for the second half of the year.”
And the reactions go on.
But the main takeaway is that with the first read on GDP growth in the second quarter due out next expected to show the economy grew at a pace of 4% during the quarter, it is not the economic past that will likely get investors excited, but the scarier future that could keep enthusiasm down.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland