The S&P 500 closed slightly lower on Tuesday, pulling back from recent highs as big tech stocks faltered at the beginning of the third quarter. Investors are digesting updates on trade policy, fiscal developments, and rising U.S. Treasury yields.
As of 4:00 p.m. ET:
- Dow Jones rose 400 points (0.9%)
- S&P 500 fell 0.1%
- NASDAQ dropped 0.8%
On Monday, both the S&P 500 and NASDAQ hit record highs, helped by optimism around easing trade tensions and expectations of upcoming Federal Reserve interest rate cuts.
Focus on Trade Deals
Recent trade developments are in the spotlight. Last week, the U.S. and China reached a trade agreement, and Canada canceled a planned digital tax on tech companies. These moves increased hopes of more trade deals before President Trump’s July 9 deadline.
However, talks with Japan are proving difficult. According to the Financial Times, U.S. officials are now pursuing narrower, quicker trade agreements to avoid the return of heavy tariffs—some up to 50%. These scaled-back deals depart from Trump’s original goal of securing 90 comprehensive agreements in 90 days.
While these smaller deals may help avoid harsh tariffs, a base 10% tariff would still remain during ongoing negotiations. Talks remain complex, and further tariffs are still under consideration.
Trump Criticizes Fed Chair Powell Again
Markets are anticipating a Fed rate cut, particularly after last week’s weaker inflation numbers. The Fed left interest rates unchanged at 4.25% to 4.5% last month, with Chair Jerome Powell advocating caution amid uncertainty over Trump’s aggressive trade policy.
President Trump criticized Powell again on Monday, sending him a handwritten letter urging significant rate cuts. Trump argued that high rates are costing the U.S. “hundreds of billions” and suggested the country should be paying just 1% interest or less. He’s also reportedly considering naming a possible successor to Powell, which could undercut Powell’s influence on monetary policy.
Markets now see over a 90% chance of a rate cut in September. Key economic data this week—especially Thursday’s jobs report—could influence those odds.
Senate Republicans Push Trump’s Big Tax Bill
The Senate narrowly passed a vote to begin debate on Trump’s sweeping tax and spending bill, dubbed “One Big Beautiful Bill.” It includes tax cuts, domestic spending changes, and border security measures.
A new Congressional Budget Office estimate says the bill could add $3.3 trillion to the deficit over 10 years. The Senate version also includes a $5 trillion debt ceiling increase—$1 trillion more than the House’s version. Lawmakers aim to pass it before the July 4 holiday to avoid a potential default later this summer.
Tesla Falls Amid Trump-Musk Clash
Tesla shares dropped sharply after Trump escalated a feud with CEO Elon Musk. Trump accused Musk of relying too heavily on federal subsidies and called for an investigation into Tesla’s government support.
On Truth Social, Trump claimed Musk may have received more subsidies than anyone in history and suggested Musk would be out of business without them. The dispute stems from Musk’s criticism of Trump’s tax bill.
Hasbro Surges on Upgrade
Meanwhile, Hasbro (HAS) hit a record high after Goldman Sachs upgraded its stock to “buy,” citing strong potential for sales growth from its new Magic: The Gathering trading cards.