Stocks fell Tuesday as strong economic data raised questions about the possibility of Federal Reserve rate cuts later this year, leading to a spike in Treasury yields. Declines across major tech stocks also dragged the market lower.

The S&P 500 dipped 1.11% to close at 5,909.03. The Dow Jones Industrial Average lost 178.20 points, or 0.42%, and ended at 42,528.36. The Nasdaq Composite slid 1.89% to 19,489.68. The major averages traded higher earlier in the day before rolling over.

Data released Tuesday by the Institute for Supply Management reflected faster-than-expected growth in the U.S. services sector in December, adding to concerns about stickier inflation.

Bond yields rose on the data, adding onto the recent climb in yields fueled largely by bets that the incoming administration's tariff plans could boost inflation. The 10-year Treasury yield was last up more than 7 basis points at 4.693% and earlier hit an intraday high of 4.699%, its highest level since April.

"You're getting a recalibration of inflation expectations and Fed rate expectations. That's triggered this small sell-off in the equity markets after the earlier enthusiasm," said Tom Hainlin, senior investment strategist at U.S. Bank Asset Management Group.

Still, Hainlin noted that the ISM number reflects a strong consumer and labor market, which he said ties into a broader picture of strong economic growth that favors corporate earnings growth.

Investors also booked some profits from megacap tech and semiconductor companies after seeing back-to-back gains from the S&P 500 and tech-heavy Nasdaq.

Nvidia shares fell 6.2% after hitting a record. The company on Monday unveiled new chips for desktop and laptop PCs that use the same Blackwell architecture. Tesla slipped 4% after Bank of America downgraded the electric vehicle maker given its high valuation and risks associated with its strategy. Meta Platforms shed nearly 2%, while Apple and Microsoft each dipped more than 1%.