April 2 (Reuters) - U.S. stock indexes fell on Tuesday, dragged down by megacap stocks and health insurers as investors grew concerned about the possibility of fewer interest rate cuts than expected from the Federal Reserve in the wake of strong economic data.
Shares of rate-sensitive growth stocks including Nvidia (NVDA.O), opens new tab, Microsoft (MSFT.O), opens new tab and Amazon (AMZN.O), opens new tab fell more than 1% each as the U.S. Treasury 10-year yield rose to its highest since late November on Tuesday's data.
The data showed U.S. factory orders as well as job openings beat expectations in February.
The Dow (.DJI), opens new tab and S&P 500 (.SPX), opens new tab closed lower on Monday after stronger-than-expected manufacturing data from the Institute for Supply Management (ISM) raised doubts over the Fed's three interest rate cuts it had outlined at the last policy meeting.
"We had that upside surprise with the ISM and now people are getting a little bit worried about another strong number this Friday in terms of jobs," said David Russell, global head of market strategy at TradeStation.
Monthly non-farm payrolls data on Friday is likely to show job additions slowed in March although average earnings ticked higher compared to the previous month.
"The idea of three cuts this year... that's sort of what people are concerned about this week," said Russell.
Traders are pricing in a near 57% chance of the Fed cutting interest rates by at least 25 basis points in June, and see two more cuts in 2024, as per CMEGroup's FedWatch tool.
The CBOE Volatility index (.VIX), opens new tab, Wall Street's fear gauge, touched a two-week high on Tuesday.
Investors will be looking for more clues in comments from a host of Fed officials including New York Fed President John Williams, Cleveland Fed President Loretta Mester and San Francisco President Mary Daly, scheduled to speak later in the day.
At 10:15 a.m. ET, the Dow Jones Industrial Average (.DJI), opens new tab was down 471.37 points, or 1.19%, at 39,095.48, the S&P 500 (.SPX), opens new tab was down 57.57 points, or 1.10%, at 5,186.20, and the Nasdaq Composite (.IXIC), opens new tab was down 245.44 points, or 1.50%, at 16,151.40.
The gloomy start to the new quarter comes on the heels of the S&P 500's strongest first quarter in five years. The three major indexes hit record highs last month, helped by optimism around artificial intelligence and expectations of easing monetary policy.
Shares of UnitedHealth (UNH.N), opens new tab, CVS Health (CVS.N), opens new tab and Humana (HUM.N), opens new tab fell between 6.2% and 13.5% on Tuesday as the U.S. government kept reimbursement rates for providers of Medicare Advantage health plans unchanged, in a setback to insurers.
Tesla (TSLA.O), opens new tab tumbled 4.9% after the automaker missed market expectations for first-quarter deliveries.
Calvin Klein-parent PVH Corp's shares (PVH.N), opens new tab tumbled 21.9% after the retailer forecast an about 11% drop in first-quarter revenue. Peer Ralph Lauren (RL.N), opens new tab lost 4.3%.
Cryptocurrency and blockchain-related stocks dropped, tracking an over 6% fall in bitcoin . Exchange operator Coinbase (COIN.O), opens new tab, bitcoin investor MicroStrategy (MSTR.O), opens new tab and crypto miner Riot Platforms (RIOT.O), opens new tab fell between 4.2% and 7.9%.
Declining issues outnumbered advancers for a 3.48-to-1 ratio on the NYSE and for a 3.90-to-1 ratio on the Nasdaq.
The S&P index recorded 20 new 52-week highs and 3 new lows, while the Nasdaq recorded 27 new highs and 69 new lows.
Reporting by Sruthi Shankar and Shashwat Chauhan in Bengaluru; Editing by Shinjini Ganguli
