U.S. stock markets slipped slightly on Tuesday after reaching record highs the day before. Investors are closely watching developments in global trade and preparing for important labor market data due later this week.

As of 9:32 a.m. ET:

• The Dow Jones was down 33 points (0.1%)
• The S&P 500 fell 16 points (0.3%)
• The NASDAQ dropped 100 points (0.5%)

On Monday, both the S&P 500 and NASDAQ had closed at record highs, supported by easing trade tensions and expectations of interest rate cuts from the Federal Reserve.

Trade Deals in Focus

Recent trade developments have caught investors’ attention. Last week, the U.S. and China announced a trade agreement, and Canada backed off a planned digital services tax on tech companies—moves that could help avoid new tariffs.

However, talks with Japan remain difficult. The U.S. is now focusing on smaller, targeted trade deals with select countries to avoid steep tariffs that could kick in after July 9. These deals aim to cover limited issues and would leave a 10% base tariff in place while broader negotiations continue.

Trump Criticizes Fed Chair Powell Again

Hopes for a Fed rate cut have grown after recent weak inflation data. The Fed has kept rates steady, adopting a cautious stance amid economic uncertainty and the impact of U.S. tariffs.

President Trump criticized Fed Chair Jerome Powell again on Monday, sending him a handwritten note pushing for aggressive rate cuts. Trump argued the U.S. should have interest rates of 1% or lower and hinted at possibly replacing Powell later this year.

Markets currently expect a high chance (over 90%) of a rate cut in September. Upcoming labor data, especially Thursday’s jobs report, could influence that outlook.

Senate Republicans Push for Tax Bill

Over the weekend, the Senate narrowly voted to start debating Trump’s broad new tax and spending bill, called “One Big Beautiful Bill.” The bill includes tax cuts, domestic policy changes, and border security measures.

A new estimate from the Congressional Budget Office says the bill could add $3.3 trillion to the federal deficit over the next 10 years. The Senate aims to pass it before the July 4 holiday.

Tesla Stock Drops After Trump-Musk Clash

Tesla shares fell after Trump criticized CEO Elon Musk, accusing him of benefiting too much from federal subsidies. Trump suggested an investigation into Tesla’s government support, adding that Musk’s success wouldn’t be possible without it.

Musk has recently spoken out against Trump’s tax and spending plan, adding to tensions between the two.

Oil Prices Rebound from 3-Week Low

Oil prices rose slightly after hitting a three-week low earlier in the day. Brent crude was up 0.4% to $67.10 a barrel, and U.S. crude rose 0.7% to $65.54.

The increase comes as OPEC+ is expected to raise output again in August, continuing a series of supply hikes this year. However, total increases still fall short of the production cuts made in the past two years.

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