A broad sell-off gathered momentum, sending all three major U.S. stock indexes down while the dollar gained and the benchmark U.S. Treasury yield jumped to its highest level since mid-December

U.S. stocks lost ground while the dollar firmed on Tuesday as the World Economic Forum in Davos entered its second day amid warnings that markets might have gotten ahead of themselves with respect to the timing and extent of central bank policy cuts.

A broad sell-off gathered momentum in afternoon trading, sending all three major U.S. stock indexes down while the dollar gained and the benchmark U.S. Treasury yield jumped to its highest level since mid-December.

There seems to be vacillation in terms of whether or not the Fed is going to cut rates in March, and today seems to be one of those days where investors have decided that maybe they are not going to cut rates in March, said Chuck Carlson, CEO at Horizon Investment Services in Hammond, Indiana.

Couple that with higher interest rates and you get a sell-off like this, which seems to be a ‘sell everything’ day, he said.

U.S. Fed Governor Christopher Waller echoed the sentiments of his European counterparts on Tuesday, saying that while U.S. inflation is nearing the central bank’s 2% goal, the Fed should not rush to lower interest rates until lower inflation can clearly be sustained.

At last glance, financial markets were pricing in a 65.2% chance of a 25 bps interest rate cut at the conclusion of the Fed’s March meeting, as per CME’s FedWatch tool.

The Dow Jones Industrial Average dropped 358.76 points, or 0.95%, to 37,234.22, the S&P 500 shed 29.78 points, or 0.62%, to 4,754.05 and the Nasdaq Composite slipped 76.39 points, or 0.51%, to 14,896.37.

European shares also dropped due to waning optimism over rate-cut expectations after comments by ECB officials.

The pan-European STOXX 600 index shed 0.24% and MSCI’s gauge of stocks across the globe lost 0.92%.

Emerging market stocks shed 1.68%. MSCI’s broadest index of Asia-Pacific shares outside Japan ended 1.82% lower, while Japan’s Nikkei shed 0.79%.

The dollar reached a one-month high against a basket of world currencies as investors reined in rate-cut bets and eyed escalating tensions in the Middle East.

The dollar index added 0.96%, with the euro down 0.73% to $1.0868.

The Japanese yen weakened 1.02% versus the greenback at 147.28 per dollar, while Sterling was last trading at $1.2623, 0.80% lower on the day.