By Caroline Valetkevitch
NEW YORK (Reuters) -U.S. stocks fell on Tuesday as investors weighed chances that the Federal Reserve could delay cutting interest rates, while Tesla (NASDAQ:TSLA) shares dropped after the electric car maker posted fewer quarterly deliveries for the first time in nearly four years.
Tesla's stock dropped 4.9%, one of the biggest drags on the S&P 500 and Nasdaq.
Healthcare shares were also among the day's weakest performers. Shares of UnitedHealth (NYSE:UNH) , CVS Health (NYSE:CVS) and Humana (NYSE:HUM) all fell sharply as the U.S. government kept reimbursement rates for providers of Medicare Advantage health plans unchanged.
Investor caution grew as U.S. Treasury 10-year yields rose to their highest since late November.
Recent solid U.S. economic reports have raised doubts about whether the Fed could deliver the three rate cuts outlined in its latest forecast.
"The narrative of 'higher for longer' is coming back into play despite the fact that the Fed does see a rate cut sometime this year. So this has got the market worried," said Quincy Krosby, chief global strategist at LPL Financial (NASDAQ:LPLA) in Charlotte, North Carolina.
The Dow Jones Industrial Average fell 396.61 points, or 1%, to 39,170.24. The S&P 500 lost 37.96 points, or 0.72%, at 5,205.81 and the Nasdaq Composite dropped 156.38 points, or 0.95%, to 16,240.45.
The CBOE Volatility index, Wall Street's fear gauge, rose.
"Healthy markets do need to pull back and most likely this is that pullback," Krosby said. The S&P 500 remains up about 9% for the year so far.
Data on Tuesday showed new orders for U.S.-manufactured goods rebounded more than expected in February, while U.S. job openings held steady at higher levels.
The market has pared back expectations for rate cuts to about two this year, from three a few weeks ago, according to LSEG's rate probability app.
Fed officials who spoke on Tuesday reiterated that the U.S. central bank is in no rush to cut rates.
San Francisco Fed President Mary Daly cited a "real risk" of cutting rates too soon and locking in too-high inflation. Fed Bank of Cleveland President Loretta Mester said she still expected the central bank to be able to cut rates this year, noting that the easing might kick off at its June policy meeting if economic data allows it.
Investors are eagerly awaiting Friday's U.S. non-farm payrolls data.
Among other stock decliners, Calvin Klein-parent PVH Corp (NYSE:PVH)'s shares tumbled 22.2% after the retailer forecast a roughly 11% drop in first-quarter revenue.
Volume on U.S. exchanges totaled 11.12 billion shares, compared with the 11.87 billion average for the full session over the last 20 trading days.
Declining issues outnumbered advancers on the NYSE by a 2.86-to-1 ratio; on Nasdaq, a 2.63-to-1 ratio favored decliners.
The S&P 500 posted 24 new 52-week highs and four new lows; the Nasdaq Composite recorded 53 new highs and 124 new lows.