Stocks fell on Tuesday after President Donald Trump renewed his attacks on China, decreasing hope the two largest world economies will reach a trade deal. Investors also braced for a key announcement on U.S. monetary policy.
The Dow Jones Industrial Average closed 23.33 points lower, or 0.1% at 27,198.02 after dropping as much as 151.49 points. The S&P 500 slipped 0.3% to 3,013.18. The Nasdaq Composite dipped 0.2% to 8,273.61.
Trump said in a series of tweets Tuesday that China is not keeping its promise of buying more U.S. agricultural products. "China is doing very badly," he wrote. "Worst year in 27 - was supposed to start buying our agricultural product now - no signs that they are doing so. That is the problem with China, they just don't come through."
However, China insists it has bought U.S. agricultural products. A U.S. trade delegation flew to China on Monday for negotiations with Chinese officials.
China and the U.S. agreed to restart trade talks late last month after they fell through in May. The two countries have been engaged in a trade war since last year. In that time, they've slapped tariffs on billions of dollars worth of each other's goods.
Kathy Entwistle, senior vice president of wealth management at UBS, said the trade war is weighing down corporate sentiment.
"At the end of the day, the whole tariff conversation hits on a broader picture," Entwistle said. "If everything is being affected by tariffs and investors are looking at how that's going to affect a company's bottom line, then businesses are going to be more conservative" in their outlook.
Traders also looked to the start of a Federal Reserve monetary policy meeting. Market expectations point to a quarter-point rate cut.
"Considering the strength of the U.S. economy and the Federal Reserve set to lower interest rates, we are witnessing a rotation from the defensive sectors of the market to the aggressive cyclical areas that are more closely tied to a growing economy and would benefit from economic stimulus," Bruce Bittles, chief investment strategist at Baird, said in a note. "We recommend staying with the strongest areas of the market which include technology, consumer discretionary, financials and industrials."
The Fed is set to deliver its decision Wednesday at 2 p.m. ET. Fed Chairman Jerome Powell is also scheduled to hold a news conference at 2:30 p.m. ET.
Investors will also look for clues from Powell about potential rate cuts later this year. Currently, traders are pricing in at least two rate cuts of 25 basis points before the end of the year, according to the CME Group's FedWatch tool.
"Chairman Powell is in a truly terrible situation," said JJ Kinahan, chief market strategist at TD Ameritrade. "I don't think there's anything he can say to truly please people."
Kinahan said the market does not know if the Powell is on board to ease further after Wednesday. "His path has been more of 'let's wait, see what happens and go from there.' But what the market is saying is 'you're going to do it.'"
Meanwhile, earnings season continued as Merck, Procter & Gamble and GrubHub released their quarterly results.
Merck posted earnings and revenue that exceeded analyst expectations, sending the stock up 1%. The company said sales of its cancer-treating drug Keytruda surged 58% in the previous quarter.
Procter & Gamble climbed more than 3% and hit an all-time high on the back of fiscal fourth-quarter results that beat analyst expectations. GrubHub, however, fell more than 12% after posting a disappointing profit.
More than 52% of S&P 500 companies have reported quarterly results thus far. FactSet data shows 75% of those companies have posted a better-than-forecast profit.
Tech giant Apple is scheduled to release its results Tuesday after the bell.
—CNBC's Silvia Amaro contributed to this report.