Dow falls nearly 400 points to continue second quarter’s weak start

New York (CNN) — Stocks fell Tuesday as investors continued to worry that the Federal Reserve could cut interest rates later than expected.

The Dow Jones Industrial Average dropped 395 points, or 1%, on Tuesday after declining more than 500 points at its lows. That means the blue-chip index had at one point sunk nearly 800 points during the first two days of the second quarter. On Tuesday, the S&P 500 ended the day down by 0.7% and the Nasdaq Composite lost roughly 1%.

“It feels like after a strong run; people are looking for an excuse to take money off the top and allow this market to have a breather,” said Art Hogan, chief market strategist at B. Riley Financial.

The market’s declines come after the S&P 500 notched its best first quarter since 2019. The S&P 500 index rose 10.2% during the first three months of the year, while the Dow and Nasdaq gained 5.6% and 9.1%, respectively.

Fresh data on Friday revealed that the Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge, rose 2.5% for the 12 months that ended in February, a faster clip than January’s price increase.

Fed Chair Jerome Powell warned that same day that rate cuts won’t be imminent.

“We don’t need to be in a hurry to cut,” he said at an event hosted by the San Francisco Fed.

Bond yields rose this week. The 10-year Treasury yield rose to 4.37% on Tuesday, retreating from earlier highs but still hovering around its highest level since last November, according to Tradeweb.

Traders pulled back their expectations for a rate cut in June to about 64% from more than 70% a week earlier, according to the CME FedWatch Tool.

Investors are looking to the March jobs report due Friday morning. Economists polled by FactSet expect a seasonally adjusted total of 202,500 jobs added in March, down from a 275,000 increase in February.

Elsewhere, health insurers are taking a hit after the Biden administration on Monday released the final payment rates for Medicare Advantage and Medicare Part D drug coverage for 2025. Federal payments to Medicare Advantage plans are expected to increase on average by 3.7%, or more than $16 billion, since the total payment depends on a number of factors.

Humana shares slid 13.4%, CVS Health shares declined 7.2% and UnitedHealth Group shares lost 6.4%.

Tesla shares slipped 4.9% on Tuesday, after the electric vehicle maker posted its first annual drop in sales since 2020 as it continued to battle with rising competition.

As stocks settle after the trading day, levels might change slightly.

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CNN’s Matt Egan and Tami Luhby contributed reporting.