U.S. stocks ended Tuesday’s session mixed as investors weighed upcoming corporate earnings, tariff-related pressures, and signs of uneven sector performance. The Nasdaq Composite led declines, sliding 137.03 points, or 0.65%, to close at 20,916.6. The Dow Jones Industrial Average shed 61.90 points, or 0.14%, finishing at 44,111.7, while the S&P 500 dropped 30.77 points, or 0.49%, to end at 6,299.17. In contrast, the Russell 2000 index of smaller-cap stocks outperformed, gaining 1.14 points, or 0.52%, to 220.87.

Despite modest losses in the large-cap benchmarks, breadth across equities remained relatively balanced, with advancing stocks nearly matching decliners. The S&P 500 saw 62.6% of issues trading above their 50-day moving average, indicating lingering underlying strength.

Disney in Focus Ahead of Earnings

Walt Disney Co. was among the most closely watched names heading into Wednesday’s earnings report. The entertainment giant is expected to post third-quarter revenue of around $23.75 billion and adjusted EPS between $1.45 and $1.48, both improvements from a year ago. FactSet estimates suggest Disney+ subscribers could rise to 127.4 million, continuing the platform's gradual expansion.

The stock, which has surged nearly 30% since its second-quarter beat, has cooled in recent weeks amid questions about valuation and macro pressures. Yet analysts remain optimistic. UBS projects Q3 EPS at $1.59 with operating income of $4.75 billion—a 12% year-over-year gain. Jefferies and Citi recently raised price targets, citing strong demand across Disney’s parks and streaming units.

Particularly under the microscope is Disney’s Experiences division, which includes theme parks and cruises. Domestic operations have benefited from new attractions and a 4% rise in per-capita spending in Q2. While international parks face slower recovery, analysts anticipate the unit to generate $8.89 billion in revenue this quarter, according to FactSet.

Tariffs Cast Shadow Over Industrial Earnings

Elsewhere in the industrials space, Caterpillar Inc. offered a cautionary tale in its latest quarterly results. While the Energy & Transportation segment performed well—driven by data center demand and oil-and-gas infrastructure—its core Construction and Resource Industries units struggled under tariff-driven margin pressure.

The company reported Q2 revenue of $16.6 billion, topping expectations, but EPS of $4.72 fell short of forecasts. Operating profit tumbled 18% year-over-year, and Caterpillar warned that tariffs would weigh further, with Q3 costs projected between $400 million and $500 million. Full-year tariff impact is expected to reach $1.3 billion to $1.5 billion.

Shares of Caterpillar fell about 4% in premarket trading as investors digested the warning. The broader industrial sector also reflected some of this cautious tone, contributing to the Dow's muted performance.

Broader Market Themes

Technology stocks were the primary drag on Tuesday, with the Nasdaq underperforming amid sector rotation and pre-earnings jitters. Despite this, the Russell 2000 index’s gains hinted at renewed interest in smaller-cap equities, which tend to benefit from domestic economic resilience.

Market internals showed a nearly even split between advancing and declining issues, and new 52-week highs outpaced lows, underscoring investors’ willingness to stay positioned in a selective risk-on environment.

While no major macroeconomic reports were released Tuesday, the market’s tone reflected anticipation of upcoming earnings from bellwether companies and concern over the persistence of inflationary pressures—particularly through tariffs, as reflected in Caterpillar’s outlook.

Looking Ahead

With Disney’s report expected before Wednesday’s opening bell, investors are eager for confirmation that the entertainment conglomerate can sustain momentum in its theme parks and streaming units while navigating external pressures. Analysts see upside if results align with guidance reaffirming fiscal year 2025 EPS of $5.75.

Meanwhile, equity strategists will continue watching sector performance for signs of rotation or fatigue after a strong summer rally that has lifted markets off mid-year lows.