Stock market today: US indexes drop as investors sour on pace of Fed rate cuts

The 10-year Treasury yield hit its highest level since November as traders readjust to a Fed rate cut delay.

• US stocks fell sharply as investors are turning skeptical on a Fed rate cut by June.
• The 10-year Treasury yield hit its highest since November.
• Fed officials still see three rate cuts as possible this year. Chairman Jerome Powell is set to speak on Wednesday.

US stocks fell for a third straight day Tuesday as investors digested the possibility that the first Federal Reserve interest rate cut won't come in June as expected.

Markets have been repricing bets on Fed monetary policy after a batch of strong economic data suggested conditions are still running too hot for a cut.

Odds of a June pivot briefly fell below 50% after Monday's manufacturing data came in hotter than expected. Meanwhile, the latest jobs opening figures show that demand for labor remains elevated.

With bond traders now adjusting to the prospect of fewer Fed cuts this year, the 10-year Treasury yield hit its highest since November, peaking at 4.4%.

So far, San Francisco Fed President Mary Daly noted that three rate cuts remained reasonable, while Cleveland's Loretta Mester concurred. Both officials want to see more evidence of falling inflation.

Later this week, investors can expected commentary from Chairman Jerome Powell speak on Wednesday, while the next jobs report is set to release Friday.

Here's where US indexes stood at the 4 p.m. closing bell on Tuesday: 

• S&P 500: 5,205.81, down 0.7%
• Dow Jones Industrial Average: 39,170.24, down 1% (397 points)
• Nasdaq Composite: 16,240.45, down 1%

Here's what else happened today: 

• The next US recession might not come until 2025, JPMorgan says.
• Ray Dalio is still investing in China, despite warnings of challenges ahead. Here's why.
• A stock bubble could form if the Fed does cut rates, "Big Short" investor Steve Eisman warns.
• A record number of cities now have home prices averaging above $1 million, Zillow says.

In commodities, bonds, and crypto: 

• Oil prices increased. West Texas Intermediate crude oil rose by 1.76 to $85.21 a barrel. Brent crude, the international benchmark, jumped by 1.93% to $88.93 a barrel. 
• Gold climbed 1% to $2,273.34 per ounce. 
• The 10-year Treasury yield gained 3.4 basis points to 4.361%. 
• Bitcoin dropped 5.5% to $65,927.