US stock markets experienced a decline on Tuesday as trade concerns resurfaced, dampening investor sentiment ahead of the Federal Reserve’s policy decision.
President Donald Trump’s recent comments on global trade deals added to the uncertainty, causing traders to remain cautious.
With the central bank’s two-day meeting underway, all eyes are on the upcoming interest rate decision and the outlook from Fed Chair Jerome Powell.
Dow Jones, S&P 500, and Nasdaq drop amid trade concerns
On May 6, the major US indices saw a broad decline, with the Dow Jones Industrial Average losing 272 points, or about 0.7%.
Similarly, the S&P 500 shed approximately 0.4%, while the Nasdaq Composite dropped by 0.5%.
Investors were clearly spooked by President Trump’s inconsistent rhetoric on trade agreements, and the uncertainty surrounding tariff negotiations weighed on market sentiment.
Shares of electric vehicle maker Tesla saw a notable dip, falling more than 2%.
This came after the company reported its lowest new car sales in Britain and Germany in over two years, despite growing demand for electric vehicles worldwide.
Other prominent stocks such as Goldman Sachs and technology giants Nvidia and Meta Platforms also saw declines, contributing to the broader market pullback.
Trump’s trade commentary raises concerns
Market participants were particularly sensitive to President Trump’s meeting with Canadian Prime Minister Mark Carney.
The two leaders discussed trade matters, but Trump’s remarks were less optimistic than earlier statements made by other US officials.
Trump walked back comments that trade deals were imminent, saying, “we don’t have to sign deals,” which contradicted earlier statements from Treasury Secretary Scott Bessent, who had claimed that the US was “very close to some deals.”
Bessent had suggested that major trade agreements could be reached soon, even mentioning the possibility of completing 80 to 90% of the country’s trade negotiations by the end of the year.
However, the lack of concrete announcements on trade deals has left investors questioning the timeline for significant progress, and concerns over tariffs continue to cloud the outlook.
Economic data and Fed’s policy decision in focus
Adding to the market’s cautious tone, economic data released earlier this week showed stronger-than-expected activity in the service sector for April, according to the Institute for Supply Management.
While this offered some optimism, the ongoing tariff concerns, combined with the uncertain trade landscape, have made market participants wary.
Meanwhile, the Federal Reserve kicked off its two-day policy meeting on Tuesday, with a rate decision set for Wednesday.
The central bank is widely expected to maintain its current stance on interest rates, with Fed Funds futures showing only a 2.7% chance of a rate cut.
However, traders are eager to hear Fed Chair Jerome Powell’s assessment of the economic landscape, especially in relation to the ongoing trade tensions.
Experts suggest that the Fed will likely hold its ground on maintaining a pause in rate cuts, as it seeks greater clarity on the economic factors that could influence policy.
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