US stocks fell on Tuesday as the Federal Reserve kicked off its two-day policy meeting. Investors are watching closely to see how the meeting could influence the Fed’s stance on interest rates and the broader economic outlook. The benchmark S&P 500 slid about 0.8%, while the Dow Jones Industrial Average dropped roughly 1%, or almost 400 points, leading the declines.
The tech-heavy Nasdaq Composite also fell 0.9%. The countdown is on for the Fed’s rate decision on Wednesday, with policymakers beginning their two-day meeting. Wall Street will listen closely to Chair Jerome Powell’s comments on how the economy is holding up.
Focus is on the Fed’s evaluation of the fallout from Trump’s trade offensive, which has yet to fully show up in economic data. President Trump’s recent remarks dimmed hopes of tariff relief, contributing to market jitters. Investors weighed mixed signals from Trump and his top officials on Tuesday.
Treasury Secretary Scott Bessent said some trade deals were moving close to a resolution. Trump also met with Canadian Prime Minister Mark Carney at the White House, sparking speculation about potential trade developments. Meanwhile, Ford shares climbed back from earlier losses as investors digested tariff uncertainties.
Barbie maker Mattel added to the storm clouds, withdrawing its guidance amid the cloudy trade scenario. Trump hinted late Monday that tariffs on pharmaceutical imports were on the way, dragging down shares of companies like Eli Lilly. Highlights on the earnings docket on Tuesday included chipmaker AMD, server maker Super Micro, and electric vehicle company Rivian.
The April jobs report indicated that the US labor market isn’t rapidly cooling, and markets are now not pricing in an interest rate cut from the Federal Reserve until the July meeting.
stocks react to Fed meeting kickoff
Some on Wall Street still believe an economic slowdown is likely underway, even if it’s not showing up in mass layoffs or a large pickup in the unemployment rate just yet.
Subsequently, they believe the Fed should probably be cutting sooner rather than later. Renaissance Macro’s head of economics Neil Dutta highlighted that wages are now growing at a slower rate year-over-year than the cost of borrowing. “Historically, that is never a good place to be,” he said, noting that past policy may have already been too tight.
“Wage and salary growth is running below the level of the fed funds rate,” Dutta wrote in a note on May 1. “That’s a sign that past policy has already been too tight!”
Disney is set to report its fiscal second-quarter earnings before the bell on Wednesday, with investors closely monitoring updates on its parks and streaming businesses. Parks, a historically resilient and significant profit driver, now face challenges from economic uncertainties and growing competition.
The company reported a 5% decline in operating income for its domestic parks, largely due to the impact of hurricanes and pre-opening expenses related to new attractions. Comcast just revealed the new name of its spin-off, previously referred to as SpinCo. The new company will now be called Versant, a name chosen to emphasize its versatility and pronounced like the root of the word “conversant.” The newly formed Versant will include most of NBCUniversal’s cable television networks, such as USA Network, CNBC, MSNBC, Oxygen, E!, SYFY, and the Golf Channel.
Comcast will maintain ownership of its NBC broadcast network, including NBC News, and its Peacock streaming service. Philips stock slid more than 4% on Tuesday as tariff concerns offset a moderate first-quarter earnings report. Shares of Tesla fell 2% on Tuesday after data pointed to demand weakness in Europe amid a Model Y changeover and CEO Elon Musk’s polarizing role in the Trump administration.
The head of the largest independent oil producer in the Permian Basin predicts US shale production has peaked and will likely decline, with oil prices hovering near four-year lows. Diamondback CEO Travis Stice pointed out that the combination of lower demand and increased supply from OPEC has put pressure on crude prices. Treasury Secretary Scott Bessent said Tuesday that new trade deals with major partners could be announced as soon as this week.
The US is currently in talks with 17 of its 18 key trading partners, with China as the exception.