Dow Drops 390 Points Amid Tariff Concerns Before Fed Meeting

U.S. stocks saw a significant drop on Tuesday as concerns regarding global trade negotiations and caution ahead of the Federal Reserve’s interest rate decision weighed heavily on the market.

The Dow Jones Industrial Average decreased by 389.83 points, marking a 0.95% decline, while the S&P 500 fell by 0.77%, and the Nasdaq Composite dropped by 0.87%.

This market slide followed President Donald Trump moderating expectations of imminent trade deals during discussions with Canadian Prime Minister Mark Carney. Trump remarked, “We don’t have to sign deals,” countering earlier assertions from both him and Treasury Secretary Scott Bessent about nearing significant agreements.

Tesla shares plunged by over 2% as new vehicle sales in Germany and the U.K. hit two-year lows, even amidst rising demand for electric vehicles. Notable tech stocks, such as Nvidia and Meta, also faced losses, along with Goldman Sachs, which contributed to the Dow’s downturn.

Federal Reserve meeting

All eyes are on the Federal Reserve, which commenced its two-day policy meeting on Tuesday. The central bank is expected to keep interest rates steady, with futures markets indicating only a 2.7% chance of a rate cut.

Nonetheless, investors are eager for insights from Chair Jerome Powell regarding the Fed’s views on the economic implications of recent tariff hikes.

While service sector data released on Monday showcased unexpected strength, market participants remain cautious about the long-term impacts of Trump’s changing trade strategies.

Hedge fund manager Paul Tudor Jones warned that even partial tariffs could act as significant tax increases, potentially subtracting several percentage points from economic growth.