Markets Slide as Investors Brace for Fed Decision and Await Trade Developments

US stock markets declined on Tuesday as investors adopted a cautious stance ahead of the Federal Reserve’s interest rate decision and amid uncertainty surrounding key global trade discussions.

The Dow Jones Industrial Average fell 283 points, or 0.7%, while the S&P 500 dropped 0.8%. The Nasdaq Composite experienced the steepest decline among the major indexes, losing 0.9%. High-profile technology firms, including Nvidia, Meta Platforms, and Tesla, each declined more than 1%. Shares of Goldman Sachs also contributed to the Dow’s losses.

The declines followed a streak of market gains that had lifted investor sentiment in recent weeks. Tuesday’s dip reflects renewed apprehension over trade policy, central bank guidance, and broader economic signals.

Markets are closely watching developments in US trade negotiations. President Donald Trump met with Canadian Prime Minister Mark Carney on Tuesday, marking the leaders’ first talks since Carney took office. The meeting comes on the heels of remarks from US Treasury Secretary Scott Bessent, who told CNBC on Monday that the US is “very close to some deals.” President Trump echoed this optimism but tempered expectations, suggesting that not all discussions would necessarily result in formal agreements.

Bloomberg also reported that India has proposed zero tariffs on some goods, hinting at possible trade concessions. However, no concrete deals have been officially announced. Tensions with Canada appeared to increase ahead of the meeting, following critical public statements from both President Trump and Commerce Secretary Howard Lutnick.

The uncertainty is compounded by broader economic concerns. Though Monday’s data from the Institute for Supply Management showed stronger-than-expected growth in the US services sector for April, market participants remain wary of tariff-related impacts on business and consumer activity.

Billionaire investor Paul Tudor Jones expressed skepticism on Tuesday, warning that even if tariffs on China are reduced, the effect could still amount to a significant drag on economic growth.

“We’ll probably go down to new lows,” he told CNBC.

Meanwhile, the Federal Reserve began its two-day policy meeting on Tuesday. The central bank is widely expected to maintain interest rates at current levels, with futures markets assigning a very low probability (2.7%) of a rate cut this week. Market participants will closely monitor Fed Chair Jerome Powell’s remarks on Wednesday for insights into the economic outlook, inflation expectations, and potential future policy shifts.

In commodities, US crude oil prices rose more than 3% on Tuesday to $59.26 per barrel, rebounding from a four-year low. Diamondback Energy CEO Travis Stice told investors he believes US onshore oil production may have peaked due to the recent slump in prices and a reduction in activity.

In corporate news, shares of Palantir Technologies dropped more than 13% despite reporting better-than-expected quarterly revenue. Analysts pointed to concerns about the company’s international growth prospects. Conversely, Ford Motor shares climbed over 3% after posting strong earnings, although the company suspended its 2025 guidance due to ongoing supply chain risks. Upwork shares surged nearly 19% on robust earnings and improved guidance.

CNBC and the Wall Street Journal contributed to this report.