U.S. stock markets eased slightly on Tuesday, retreating from recent record highs as investors weighed developments in trade negotiations and fiscal policies while anticipating key labor market data due later this week.

By 9:32 a.m. ET, the Dow Jones Industrial Average had dropped 33 points (0.1%), the S&P 500 slipped 16 points (0.3%), and the NASDAQ Composite fell 100 points (0.5%).

Just the day before, both the S&P 500 and NASDAQ had closed at fresh all-time highs, boosted by optimism around easing trade tensions and mounting expectations of potential interest rate cuts from the Federal Reserve.

Trade Negotiations Take the Spotlight

The recent announcement of a trade agreement between the U.S. and China, along with Canada’s last-minute withdrawal of its digital services tax on tech firms, has raised hopes that several trade deals might be finalized ahead of President Trump’s July 9 deadline.

Still, talks with Japan remain complicated. According to the Financial Times, which cited sources familiar with the discussions, U.S. trade officials are now prioritizing “agreements in principle” on more limited issues with select countries, aiming to secure quick progress before the steep tariffs slated to return on July 9.

This approach marks a scaling back from Trump’s original goal of negotiating 90 comprehensive trade agreements within the 90-day tariff pause that started April 2. While these narrower agreements could shield some countries from the harshest tariffs, a baseline 10% tariff would remain in place as broader talks continue. The administration is also reportedly considering tariffs on key industries alongside this phased strategy.

Trump Reignites Criticism of Fed Chair Powell

Following last week’s softer-than-expected inflation data, expectations of a Federal Reserve rate cut this year have grown, lending support to the equity markets.

After its recent two-day meeting, the Fed held interest rates steady between 4.25% and 4.5%. Chair Jerome Powell emphasized a cautious wait-and-see approach amid uncertainty over how Trump’s tariff policies might affect the economy.

This caution frustrated President Trump, who ramped up his criticism of Powell on Monday. He sent the Fed chief a handwritten note accusing him of being “as usual, too late” to reduce rates.

Trump posted the letter on social media alongside a chart comparing global central bank rates. He urged Powell to cut borrowing costs “a lot,” claiming “hundreds of billions” are being “lost.” Trump added the U.S. should be paying “1% interest or better.”

Speculation is growing that Trump may nominate a successor to Powell later this year, potentially creating a “shadow” Fed chair and diluting Powell’s influence on policy.

Markets now see over a 90% chance of a rate cut in September. Investors will closely watch upcoming economic data, especially Thursday’s official jobs report, along with job openings and manufacturing PMI figures.

Senate Republicans Push Tax Bill Debate Forward

The Senate narrowly passed a 51–49 procedural vote Saturday to begin debating President Trump’s sweeping “One Big Beautiful Bill,” which combines tax cuts, domestic spending reforms, and border security measures.

A new Congressional Budget Office report released Sunday estimates the Senate version would add about $3.3 trillion to the federal deficit over the next decade.

Republicans aim to complete the process before the July 4 holiday.

The bill proposes raising the debt ceiling by $5 trillion — $1 trillion more than the House version — but failure to pass it could push the Treasury toward a possible default deadline this summer.

Tesla Shares Slide Amid Trump-Musk Clash

Tesla (NASDAQ:TSLA) shares took a sharp hit after President Trump escalated his feud with CEO Elon Musk. Trump accused Musk of benefiting excessively from government subsidies and called for a review of federal support for Tesla.

On Truth Social, Trump suggested the Department of Government Efficiency (DOGE) investigate Tesla’s subsidies, warning “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 conflict largely stems from Musk’s opposition to the tax and spending bill supported by Trump now under Senate consideration.

Oil Prices Rebound from Three-Week Low

Crude oil prices inched higher Tuesday after dipping to a three-week low earlier in the session. The rebound followed easing supply concerns and expectations that OPEC+ will increase production.

At 9:32 a.m. ET, Brent crude futures rose 0.4% to $67.10 per barrel, recovering from their lowest point since June 11, just before the Israel-Iran conflict escalated. U.S. West Texas Intermediate futures climbed 0.7% to $65.54 per barrel.

OPEC+ is set to meet on July 6. Reuters reported last week the group plans to raise output by 411,000 barrels per day in August, following increases in May, June, and July.

This would bring the total supply boost for 2025 to 1.78 million barrels per day, though it still falls short of production cuts implemented over the past two years.