Dow Jones futures fall as traders adopt caution due to Fed independence concerns

• Dow Jones futures decline as market sentiment turned cautious amid growing concerns over the Fed's independence.
• President Trump announced the dismissal of Fed Governor Lisa Cook over allegations of mortgage fraud.
• Traders await Nvidia's highly anticipated earnings report scheduled for Wednesday.

Dow Jones futures fall by 28% to trade around 45,200 during European hours on Tuesday, ahead of the opening of the United States (US) regular markets. Moreover, the S&P 500 futures decline by 0.26% to trade below 6,450, and the Nasdaq 100 futures fall by 0.30%, trading around 23,400.

US stock futures decline as market sentiment turns cautious amid rising concerns over Federal Reserve (Fed) independence after US President Donald Trump announced to remove Fed Governor Lisa Cook over alleged mortgage fraud. President Trump posted a letter on social media early Tuesday, saying that he was removing Fed Governor Cook from her position on the Fed's board of directors. However, Cook said that she will not resign as there is no cause exists for her to be fired. I will continue to carry out duties, she added.

The dismissal of the Fed Governor Lisa Cook may increase the chances of earlier interest rate cuts, given Trump's ongoing pressure on the central bank to reduce borrowing costs. Additionally, Fed Chair Jerome Powell said at the Jackson Hole symposium last week that risks to the job market were rising, but also noted inflation remained a threat and that a decision wasn't set in stone.

Traders also adopt caution as Trump warned that he could impose a 200% tariff on Chinese goods if Beijing refuses to supply magnets to the United States (US). Moreover, he also threatened "subsequent additional tariffs" and export restrictions on advanced technology and semiconductors in retaliation for digital services taxes that hit American technology companies.

Traders will likely await Nvidia's highly anticipated earnings report due on Wednesday, along with the upcoming release of the Q2 US Gross Domestic Product Annualized and July Personal Consumption Expenditures (PCE) Price Index data, the Fed's preferred inflation gauge.

In the previous regular session, the Dow Jones Industrial Average slipped 0.77%, the S&P 500 declined 0.43%, and the Nasdaq Composite eased 0.22%. Nine of the 11 S&P 500 sectors closed lower, led by losses in consumer staples, healthcare, and utilities.