The tech-heavy Nasdaq led the way lower, slumping 215.50 points or 1.0 percent to 22,573.47. The S&P 500 slid 36.83 points or 0.6 percent to 6,656.92, while the narrower Dow dipped 88.76 points or 0.2 percent to 46,292.78.
Wall Street weakness partly stemmed from concerns about overvaluation after Fed Chair Jerome Powell noted equities are “fairly highly valued.” Speaking in Rhode Island, Powell highlighted the Fed’s challenge of balancing upside inflation risks with downside employment risks. He warned that easing too quickly could leave inflation unresolved, while keeping policy restrictive for too long could hurt the labor market. Powell stressed the need to carefully balance both sides of the Fed’s dual mandate.
Nvidia (NVDA) pulled back which impacted Nasdaq, with the chipmaker tumbling by 2.8 percent after surging nearly 4 percent to a new record closing high on Monday. The rally in Monday's session came after Nvidia and OpenAI announced a strategic partnership to deploy at least 10 gigawatts of Nvidia systems for OpenAI's next-generation AI infrastructure.
Retail stocks significantly moved downwards, dragging the Dow Jones U.S. Retail Index down by 1.2 percent. Software stocks were notably weak, as reflected by the 1.2 percent loss posted by the Dow Jones U.S. Software Index. Energy stocks continued to turn in a strong performance amid a sharp increase by the price of crude oil, with the Philadelphia Oil Service Index surging by 3.5 percent and the NYSE Arca Oil Index climbing by 1.6 percent.
Asia-Pacific stocks turned in a mixed performance on Tuesday, with Japanese markets closed for a holiday. Hong Kong's Hang Seng Index slid by 0.7 percent, while South Korea's Kospi climbed by 0.5 percent. European stocks moved mostly higher on the day. The French CAC 40 Index advanced by 0.5 percent and the German DAX Index rose by 0.4 percent, although the U.K.'s FTSE 100 Index bucked the uptrend and closed just below the unchanged line.
In the bond market, treasuries moved to the upside after showing a lack of direction earlier in the session. Subsequently, the yield on the benchmark ten-year note which moves opposite of its price, fell by 2.3 bps to 4.12 percent.