Dow drops 390 points as tariff uncertainty overshadows Fed meeting

U.S. stocks fell sharply Tuesday as uncertainty over global trade negotiations and caution ahead of the Federal Reserve’s rate decision weighed on markets. 

The Dow Jones Industrial Average dropped 389.83 points, or 0.95%, while the S&P 500 lost 0.77% and the Nasdaq Composite slipped 0.87%.

The sell-off came after President Donald Trump dialed back expectations for imminent trade deals during a meeting with Canadian Prime Minister Mark Carney. “We don’t have to sign deals,” Trump said, contradicting earlier remarks by both himself and Treasury Secretary Scott Bessent, who had suggested major agreements were close.

Shares of Tesla declined over 2% after new car sales in Germany and the U.K. hit two-year lows, despite growing demand for electric vehicles. Tech stocks like Nvidia and Meta also fell, along with Goldman Sachs, which pulled the Dow lower.

Federal Reserve meeting

Markets are also focused on the Federal Reserve, which kicked off its two-day policy meeting Tuesday. The central bank is widely expected to hold rates steady, with futures markets pricing in just a 2.7% chance of a rate cut. 

However, investors are looking for guidance from Chair Jerome Powell on how the Fed is interpreting the economic impact of renewed tariff tensions.

While service sector data released Monday showed surprising strength, market participants remain concerned about the longer-term implications of Trump’s evolving stance on trade. 

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