U.S. stocks saw a significant drop on Tuesday, with market concerns over global trade discussions and caution ahead of the Federal Reserve’s interest rate decision weighing heavily on equities.

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 retreat followed President Donald Trump’s moderation of expectations regarding imminent trade agreements during his talks with Canadian Prime Minister Mark Carney. Trump remarked, “We don’t have to sign deals,” which contrasts earlier claims he and Treasury Secretary Scott Bessent had made about potential significant agreements being close.

Tesla’s stock fell more than 2% as new vehicle sales in Germany and the U.K. hit two-year lows, despite rising demand for electric cars. Tech stocks such as Nvidia and Meta also experienced declines, along with Goldman Sachs, contributing to the Dow’s downturn.

Federal Reserve meeting

The focus is also on the Federal Reserve, which initiated its two-day policy meeting on Tuesday. The central bank is expected to keep current interest rates stable, with futures markets showing only a 2.7% chance of a rate cut.

However, investors are looking for insights from Chair Jerome Powell about the Fed’s views on the economic impacts of recent tariff increases.

Even though service sector data released on Monday showed unexpected resilience, market participants remain cautious about the long-term implications of Trump’s evolving trade strategies.

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