U.S. equity markets dipped slightly on Tuesday, pulling back from recent record peaks as investors digested developments on trade and fiscal policies while awaiting key labor market reports scheduled for later this week.
As of 9:32 a.m. ET, the Dow Jones Industrial Average was down 33 points (0.1%), the S&P 500 fell 16 points (0.3%), and the NASDAQ Composite dropped 100 points (0.5%).
Monday had seen fresh closing records for both the S&P 500 and NASDAQ Composite, buoyed by optimism over easing trade tensions and growing speculation about potential Federal Reserve interest rate cuts.
Trade Agreements Take Center Stage
Last week’s announcement of a trade deal between the U.S. and China, combined with Canada’s last-minute decision to scrap its digital services tax on tech firms, has raised hopes that several trade agreements may be finalized before President Trump’s July 9 deadline.
However, negotiations with Japan remain challenging. According to the Financial Times, citing sources close to the discussions, U.S. trade officials are now focusing on securing “agreements in principle” on narrower issues with select countries. This strategy aims to achieve quick wins before the July 9 deadline when steep reciprocal tariffs are scheduled to be reinstated.
The FT report explains that these more limited deals represent a step back from Trump’s earlier promise to forge 90 comprehensive trade agreements within the 90-day tariff pause initiated April 2.
Though such agreements could spare some countries from the most severe tariffs, a 10% baseline tariff would still remain as talks on broader issues continue. The administration is also reportedly considering tariffs on critical sectors alongside this phased approach.
Trump Resumes Criticism of Fed Chair Powell
Expectations of a Fed rate cut this year have risen following last week’s softer-than-expected inflation figures, further supporting equity markets.
After its two-day meeting last month, the Federal Reserve left rates steady at a 4.25% to 4.5% target range. Fed Chair Jerome Powell advocated a cautious, wait-and-see stance amid uncertainty about how Trump’s aggressive tariff policies will impact the broader economy.
This approach drew ire from President Trump, who intensified his attacks on Powell Monday. He sent a handwritten note to the Fed chair criticizing him for being “as usual, too late” to lower interest rates.
Accompanying the letter—posted on social media by Trump—was a list of policy rates from central banks worldwide. The president urged Powell to cut borrowing costs by “a lot,” claiming “hundreds of billions” are “being lost.” Trump added that the U.S. should be paying “1% interest or better.”
There is speculation Trump might nominate a successor to Powell later this year. Analysts warn such a move could create a “shadow” Fed chair, potentially undermining Powell’s influence on policy decisions.
Markets currently price in over a 90% probability of a September rate cut, with key economic reports—especially Thursday’s official monthly jobs data—expected to influence those odds. Prior to that, investors will closely watch job openings and manufacturing PMI figures.
Senate Republicans Push Forward Tax Bill Debate
The Senate narrowly approved a 51–49 procedural vote Saturday to begin debate on President Trump’s comprehensive “One Big Beautiful Bill,” which bundles tax cuts, domestic spending changes, and border security measures.
The Congressional Budget Office released an updated estimate Sunday indicating the Senate version would add roughly $3.3 trillion to the federal deficit over the next decade.
Senate Republicans aim to complete the process before the July 4 holiday.
Their bill proposes increasing the debt ceiling by $5 trillion—$1 trillion more than the House’s version—but failure to pass it could bring the Treasury close to a default deadline this summer.
Tesla Shares Decline Amid Trump-Musk Dispute
Tesla (NASDAQ:TSLA) shares fell sharply following President Trump’s escalation of his public feud with Elon Musk. Trump accused Musk of taking excessive government subsidies and called for a review of Tesla’s federal support.
On Truth Social, Trump suggested the Department of Government Efficiency (DOGE) should investigate Tesla’s subsidies, warning that “Elon may get more subsidy than any human being in history.”
He added, “Without subsidies, Elon would probably have to close up shop and head back home to South Africa.”
The tension stems largely from Musk’s opposition to the sweeping tax and spending bill backed by Trump and currently under Senate consideration.
Oil Prices Recover From Three-Week Low
Crude oil prices edged higher Tuesday, rebounding after an earlier dip to three-week lows. The bounce followed easing concerns over supply and anticipation of an OPEC+ production increase.
At 9:32 a.m. ET, Brent crude futures rose 0.4% to $67.10 per barrel after dropping earlier to their lowest level since June 11, just before the outbreak of the Israel-Iran conflict. U.S. West Texas Intermediate crude futures climbed 0.7% to $65.54 per barrel.
OPEC+ is scheduled to meet on July 6. Reuters reported last week that the group plans to boost output by 411,000 barrels per day in August, following similar increases in May, June, and July.
This would bring the total supply increase for 2025 to 1.78 million barrels per day, though it remains below the volume of production cuts imposed by OPEC+ over the last two years.