Dow drops 260 points as sell-off resumes

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Stocks pulled back on Tuesday as a sell-off that has engulfed Wall Street in recent weeks resumed after two straight winning sessions. The Dow Jones Industrial Average lost 260.32 points, or 0.62%, closing at 41,581.31. The S&P 500 shed 1.07%, ending at 5,614.66.

Best Monday for the S&P 500 since the bear market ended in October '22.

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The broad market index concluded the day 8.6% off its closing high reached in February, bringing it near correction territory. The Nasdaq Composite dropped 1.71% and settled at 17,504.12. Tesla, one of the stocks hardest hit during the market’s recent correction, was down yet again on Tuesday.

The stock fell more than 5% after RBC Capital Markets cited rising competition in the EV space. It has declined more than 36% over the past month. The EV maker wasn’t the only tech name down during the session.

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Shares of Apple and Microsoft dropped nearly 4% and more than 3%, respectively.

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“It does appear the market really does want to rotate into things that haven’t worked as well and out of things that did work well for the last couple of years, so that may be just what all this is about,” said Rhys Williams, chief investment officer at Wayve Capital. “The markets are going to remain choppy up until whatever decision is made on April 2,” Williams added, referring to President Donald Trump’s upcoming tariff decisions on some imports from Canada and Mexico.

The declines follow a volatile period on Wall Street. That marked a turn after some soft economic data and Trump’s on-again-off-again tariff policy left investors wary of the U.S.’ financial health. The S&P 500 entered correction territory last week, but the index made up some ground in the recovery rally seen in Friday’s and Monday’s sessions.

Despite the recent bounce, the tech-heavy Nasdaq still sits in a correction, a term used to describe an index falling at least 10% from a recent high. The three major averages all remain down on the year, underscoring the strength of the market’s pullback. While investors continue to follow updates out of the White House, they’ll turn their attention to the Federal Reserve’s two-day policy meeting that kicked off Tuesday.

Traders will closely follow Wednesday afternoon’s interest rate announcement and subsequent press conference with Fed Chair Jerome Powell.

Latest pullback hits Wall Street indicators

Fed funds futures are pricing in a likelihood that the central bank holds rates steady, according to CME’s FedWatch Tool.

Stocks could see more pullback from current trading levels, according to Ross Mayfield, an investment strategist at Baird. “Your average non-recession pullback or correction is in the 15% range, which is not all that different from what the average entry-year drawdown is over the last 40 or 50 years anyway, so would I be surprised at all if we re-enter correction territory and press toward 14% or 15%? Not at all,” he said.

As of afternoon trading, the S&P 500 has tumbled 8.6% from its recent all-time high, which it notched in late February. “I don’t think that a recession is imminent, and without more significant economic weakness, I think that’s probably the extent of it,” Mayfield continued. MicroStrategy, formerly known as Strategy, plans to raise about $500 million in an offering of a new class of preferred stock known as perpetual Strife to fund more of its bitcoin purchases.

It is expected to trade on the Nasdaq under the ticker STRF. The company will offer five million shares of Strife at $100 per share, accruing a 10% annual dividend rate payable quarterly in cash beginning June 30. MicroStrategy has bought about 500 million bitcoin worth more than $40 billion, largely funded through debt and equity sales.

Tuesday’s news follows a plan announced last week to raise $21 billion through perpetual “Strike” (STRK) preferred stock. Unlike the similarly named Strife shares, STRK can be converted into MicroStrategy’s common stock. Investors should brace for more downside ahead even if there is a near-term rally in the market, according to Janney Montgomery Scott.

“We believe there may be more upside for stocks on a short-term basis, as the major benchmarks we track have yet to make key Fibonacci retracements on their charts (38.2%; 50%; with 50% being the more important one to watch),” wrote Dan Wantrobski, the firm’s associate director of research, in a recent note to clients. “We remain cautious moving through the March – April timeframe and believe another leg lower can materialize in the coming days/weeks.” Wantrobski noted that the S&P 500 could fall further to 5,000 or even lower to 4,650. That implies downside of nearly 12% to 18% from Monday’s close.

The stock market hasn’t bottomed yet, with further volatility likely through May, according to Wolfe Research. “We don’t believe the market has bottomed yet, as we expect further choppy inflation and employment data over the next few months,” said Chris Senyek, chief investment strategist at Wolfe Research. “Additionally, with investors feeling significant ‘tariff fatigue’ we expect policy uncertainty to linger at least until May.”

Bank of America’s Global Fund Manager Survey showed a “bull crash” this month.

The widely followed investor survey recorded the largest “bull crash” since the global financial crisis, highlighting the level of bearishness among fund managers.