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U.S. and Canadian stocks fell on Tuesday as investors weighed chances that the Federal Reserve could delay cutting interest rates, while Tesla shares dropped after the electric car maker posted fewer quarterly deliveries for the first time in nearly four years.

Investor caution grew as U.S. Treasury 10-year yields rose to their highest since late November. Canada’s 10-year bond yield touched its highest level since mid-February at 3.678%.

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

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

“Healthy markets do need to pull back and most likely this is that pullback,” Krosby said. The S&P 500 remains up about 9% for the year so far.

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 market has pared back expectations for Fed rate cuts to about two this year, from three a few weeks ago, according to LSEG’s rate probability app.

Fed officials who spoke on Tuesday reiterated that the U.S. central bank is in no rush to cut rates.

San Francisco Fed President Mary Daly cited a “real risk” of cutting rates too soon and locking in too-high inflation. Fed Bank of Cleveland President Loretta Mester said she still expected the central bank to be able to cut rates this year, noting that the easing might kick off at its June policy meeting if economic data allows it.

Investors are eagerly awaiting Friday’s U.S. non-farm payrolls data. Canadian jobs figures for March will also be released at the same time.

The Toronto Stock Exchange’s S&P/TSX composite index ended down 110.15 points, or 0.5%, at 22,075.10, pulling back from a record closing high on Monday.

The telecom sector led declines in Toronto, falling 2%, after brokerage BMO cut its share price targets for several names in the sector. The firm also lowered its ratings on both BCE Inc. and Quebecor Inc. to “market perform” from “outperform” on a slower growth outlook based on competitive pressures.

Real estate was down 1.3%. Industrials and heavily-weighed financials were also a drag, with both sectors losing 1%. Helping to offset those declines were gains for resource shares.

The energy sector added 1.2% as oil settled 1.7% higher at US$85.15 a barrel. The move in oil came as supplies face fresh threats from Ukrainian attacks on Russian energy facilities.

The materials sector added 0.6% as copper prices rose and gold climbed to a fresh record high.

On Wall Street, Tesla’s stock dropped 4.9%, one of the biggest drags on the S&P 500 and Nasdaq.

Health-care shares were also among the day’s weakest performers in the U.S. Shares of UnitedHealth, CVS Health and Humana all fell sharply as the U.S. government kept reimbursement rates for providers of Medicare Advantage health plans unchanged.

The Dow Jones Industrial Average fell 396.61 points, or 1%, to 39,170.24. The S&P 500 lost 37.96 points, or 0.72%, at 5,205.81 and the Nasdaq Composite dropped 156.38 points, or 0.95%, to 16,240.45.

Among other stock decliners, Calvin Klein-parent PVH Corp’s shares tumbled 22.2% after the retailer forecast a roughly 11% drop in first-quarter revenue.

Volume on U.S. exchanges totaled 11.12 billion shares, compared with the 11.87 billion average for the full session over the last 20 trading days. Declining issues outnumbered advancers on the NYSE by a 2.86-to-1 ratio; on Nasdaq, a 2.63-to-1 ratio favored decliners. The S&P 500 posted 24 new 52-week highs and four new lows; the Nasdaq Composite recorded 53 new highs and 124 new lows.

Reuters, Globe staff

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