Dow Drops 390 Points as Tariff Concerns Mount Before Fed Meeting

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

The Dow Jones Industrial Average slid 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 slump followed President Donald Trump moderating expectations for imminent trade agreements during his discussions with Canadian Prime Minister Mark Carney. Trump remarked, “We don’t have to sign deals,” contradicting prior statements from both him and Treasury Secretary Scott Bessent, who had indicated that significant agreements were on the horizon.

Tesla’s stock fell by over 2% after new car sales in Germany and the U.K. hit two-year lows, despite increasing demand for electric vehicles. Technology shares, including Nvidia and Meta, also experienced losses, alongside Goldman Sachs, which contributed to the Dow’s downturn.

Federal Reserve meeting

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

However, investors are eager for insights from Chair Jerome Powell regarding the Fed’s stance on the economic impact of recent tariff increases.

While service sector data released on Monday showed unexpected resilience, market participants remain cautious about the long-term consequences of Trump’s evolving trade policies.

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