US stocks fall as Tesla drops, rate cut timing weighed

Adding to caution, U.S. Treasury 10-year yields rose to their highest since late November.

"The narrative of 'higher for longer' is coming back into play despite the fact that the Fed does see a sometime this year. So this has got the market worried," said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

Recent solid U.S. economic reports have raised doubts about whether the Fed could deliver the three rate cuts outlined in its latest forecast.

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 Dow Jones Industrial Average fell 437.15 points, or 1.1%, to 39,129.7. The S&P 500 lost 46.03 points, or 0.88%, at 5,197.74 and the Nasdaq Composite dropped 190.95 points, or 1.16%, to 16,205.89.

Healthcare shares were among the day's weakest performers. UnitedHealth, CVS Health and Humana fell as the U.S. government kept reimbursement rates for providers of Medicare Advantage health plans unchanged, in a setback for insurers.

The CBOE Volatility index, Wall Street's fear gauge, touched an over two-week high.

Traders are pricing in a near 57% chance of the Fed cutting interest rates by at least 25 basis points in June, down from 64% just a week ago, as per CMEGroup's FedWatch tool.

Investors are eagerly awaiting Friday's U.S. non-farm payrolls data. Also, several Fed officials are due to speak this week.

Among decliners, Calvin Klein-parent PVH Corp's shares tumbled after the retailer forecast a roughly 11% drop in first-quarter revenue.

Declining issues outnumbered advancers on the NYSE by a 3.50-to-1 ratio; on Nasdaq, a 3.08-to-1 ratio favored decliners.

The S&P 500 posted 22 new 52-week highs and four new lows; the Nasdaq Composite recorded 43 new highs and 113 new lows.