The S&P 500 (SPX) fell 0.5% to 6,298.53, closing lower after an initial gain at the open. The index was led down by declines in the utilities, tech, and communication services sectors.

The Nasdaq Composite (IXIC) shed 0.7% to 20,908.83, with mega-cap technology stocks mostly lower.

The Dow Jones Industrial Average (DJI) closed 0.1% lower at 44,129.58, showing more resilience than the other major indexes.

In a notable counter-trend, small-cap equities fared better, with the Russell 2000 index up 0.6%, suggesting a shift in investor focus.

Gartner (IT) was the S&P 500's weakest performer, plummeting nearly 28% after reducing its full-year sales guidance, citing soft demand.

Vertex Pharmaceuticals (VRTX) dropped 21% after announcing it would halt the development of an experimental pain treatment.

TransDigm Group (TDG) tumbled 12% after missing sales and profit estimates for its fiscal third quarter.

On the positive side, Palantir (PLTR) soared after beating earnings expectations and raising its full-year guidance, driven by strong demand for its AI platform.

Pfizer (PFE) climbed 5% on a solid earnings beat.

Amazon (AMZN) rose 1%, rebounding from two days of declines.

The 10-year Treasury note yield was unchanged at around 4.21%, continuing to trade near its three-month lows.

The market's focus remains on the possibility of a Federal Reserve rate cut in September, with a near 90% probability now priced in. However, mixed messages from Fed officials and the latest ISM services data, which showed slowing activity but rising prices, created some uncertainty about the path forward.

Crude oil prices fell again on Tuesday, losing ground for the fifth consecutive session.

WTI crude dropped 1.7% to $65.15 per barrel, as the market continues to react to the prospect of weaker U.S. growth and reports of a bumper production increase from OPEC+ members.

European benchmark natural gas prices saw a slight gain of 0.3%.

Gold futures rose 0.3% to $3,435 an ounce, extending a four-day rally. This continued strength is attributed to ongoing safe-haven demand amidst economic uncertainty and the growing expectation of a Federal Reserve rate cut.

Silver also saw buying interest due to its defensive characteristics and industrial applications.

The Institute for Supply Management (ISM) Services PMI for July came in at 50.1, missing the median estimate of 51.5. While this reading is barely above the contraction-expansion threshold, the prices paid component accelerated from 67.5 to 69.9, signaling heightened inflationary pressures.

This is a sign of a potential stagflationary environment, where slowing growth is accompanied by rising prices, a key risk factor for the market.

The US Dollar Index (DXY) was little changed at 98.76, trading sideways after falling for two consecutive days.

The Japanese Yen (JPY) remained firm, while the Euro (EUR) and British Pound (GBP) saw some consolidation after their sharp gains against the dollar at the end of last week. The muted FX market activity reflected the conflicting signals from the services sector data, with a slowdown in activity but an increase in price pressures, leaving currency traders in a holding pattern.