US stocks declined on Tuesday as investors looked ahead to the Federal Reserve’s policy announcement and monitored developments in global trade talks.
The Dow Jones Industrial Average fell 283 points, or 0.7%, while the S&P 500 dropped 0.8% and the Nasdaq Composite declined 0.9%. Major tech stocks, including Nvidia, Meta Platforms, and Tesla, each lost more than 1%.
President Trump is set to meet Canadian Prime Minister Mark Carney on Tuesday, marking their first official talks since Carney took office earlier this year.
The meeting follows comments from Treasury Secretary Scott Bessent, who told CNBC on Monday that the US is “very close to some deals.”
Trump had made similar remarks over the weekend, and a Bloomberg report suggested India has proposed zero tariffs on select goods.
Despite this, no formal trade agreements have been announced.
Meanwhile, data from the Institute for Supply Management showed stronger-than-expected growth in the US service sector in April, though concerns over tariffs continued to weigh on sentiment.
Fed meets on Wednesday
According to the CME FedWatch Tool, 97% of market participants expect the US Federal Reserve to keep interest rates unchanged on May 7, despite increasing pressure from President Donald Trump and some of his deputies.
The Federal Reserve’s upcoming meeting takes place amid conflicting economic signals.
US GDP unexpectedly contracted in the first quarter, while April’s job growth surpassed expectations.
At the same time, concerns about a potential recession are growing among Wall Street economists, largely due to the impact of President Trump’s tariffs.
The new import duties, including a 145% tariff on goods from China, are contributing to higher consumer prices in the US.
Fed Chair Jerome Powell has indicated a cautious stance, stating last month that the central bank can afford to remain patient as it monitors the effects of the administration’s trade and economic policies.
Recent data shows that inflation in the US is slowing, but the Trump administration’s newly imposed tariffs on imports could reverse that trend, potentially driving prices higher and adding to the uncertainty.
This presents a difficult balancing act for Fed Chair Jerome Powell.
A strong labour market gives the Fed reason to remain cautious and hold rates steady for now.
Fitch Ratings has cut its US growth forecast for 2025 to 1.2%, down from 2.8% in 2024.
However, the agency does not anticipate rate cuts in the near term, as it expects inflation to climb back above 4% by year-end.
The combination of weakening growth and rising inflation leaves the Fed with limited options.
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