U.S. stocks ended Wednesday’s session mixed as fresh signs of economic strain and inflationary pressure from tariffs unsettled investors, with the Dow Jones Industrial Average falling while the Nasdaq Composite eked out modest gains.

The Dow slid 91.72 points, or 0.22%, to close at 42,427.9, dragged lower by broad concerns about the health of the services sector. The S&P 500 edged up 0.45 points, or 0.01%, finishing at 5,970.82 after wavering near the psychologically important 6,000 mark. The Nasdaq Composite rose 61.53 points, or 0.32%, to end at 19,460.5, buoyed in part by tech names amid a cautious trading session.

Markets digested a wave of discouraging economic data early in the day, which set a cautious tone that persisted into the close. The Institute for Supply Management’s (ISM) Services PMI unexpectedly contracted in May, registering a reading of 49.9 — the first time the index has dipped below 50 since June 2024. The report pointed to waning demand, elevated input costs, and ongoing uncertainty surrounding tariffs and supply chains.

“The May PMI level is not indicative of a severe contraction, but rather uncertainty that is being expressed broadly among ISM Services Business Survey panelists,” said Steve Miller, Chair of ISM’s Services Business Survey Committee.

The sharpest declines came in the New Orders Index, which fell nearly six points to 46.4, suggesting demand is weakening across key industries. Compounding concerns, the Prices Paid Index surged to 68.7 — its highest level since late 2022 — driven in large part by tariffs on imports from China, Canada, and Mexico. These levies have pushed up costs for steel, hvac systems, and construction materials, disrupting residential and commercial supply chains.

Meanwhile, labor market data from adp added to the bearish narrative. Private-sector employers added just 37,000 jobs in May, the weakest figure since March 2023 and far below the consensus estimate of 140,000. “The labor market may be entering a more fragile phase amid persistent macroeconomic uncertainty and tariff headwinds,” ADP noted in its report.

The Russell 2000, often seen as a proxy for smaller domestic companies, fell 0.28% to 208.44, reflecting unease among investors over future growth prospects.

Despite the inflationary undertones, speculation mounted over potential Federal Reserve action later this year. However, analysts noted that the Fed faces a delicate balancing act. While weakening demand supports the case for easing, rising input costs complicate the picture.

Investors now turn their focus to Friday’s closely watched Nonfarm Payrolls report, which may offer further clarity on the strength of the labor market and the Fed’s policy trajectory heading into the second half of the year.