U.S. stock-market indexes closed sharply lower Tuesday after Federal Reserve Chairman Jerome Powell highlighted the strengthening economy during his congressional testimony, but investors grew jittery that that improvement may prompt the central bank to be more aggressive in tightening monetary policy.

Recap of live blog: Fed Chairman Powell testifies before House

The Dow Jones Industrial Average DJIA, -2.29% tumbled 299.24 points, or 1.2%, to 25,410.03. Walt Disney Company DIS, -2.57% was the worst performer on the Dow, falling 4.5%. Merck & Co. Inc. MRK, -2.20% fell 2.4%, while Nike Inc. NKE, -2.01% dropped 2.3%.

The S&P 500 index SPX, -1.93% fell 35.32 points, or 1.3%, to 2,744.28 with all of the 11 main sectors finishing in the red. Consumer-discretionary and real-estate stocks led the losses, down more than 2%, while telecoms and utilities, sectors—the most sensitive to interest rates—fell 1.8% and 1.7% respectively.

The Nasdaq Composite Index COMP, -1.59% declined 91.11 points, or 1.2%, to 7,330.35

Equity prices turned lower in early trade and extended losses into the close, while the bond yield on the 10-year Treasury shot up to 2.9%.

With one trading day left in the month, the S&P 500 and Dow are set to book their first monthly declines in nearly a year.

What drove markets?

“We’ve seen continuing strength in the labor market. We’ve seen some data that will, in my case, add some confidence to my view that inflation is moving up to target. We’ve also seen continued strength around the globe, and we’ve seen fiscal policy become more stimulative,” Powell said in testimony.

Powell’s comments, especially his personal view about the economy, appeared to turn investors cautious as they considered the possibility of faster pace of rate increases. Odds of four rates increases in 2018 rose to 33% from about 20% on Monday, according to CME Group’s data.

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What did strategists say?

“Market participants interpreted Powell’s comments being hawkish, specifically that there may be more than three rate increases on the cards,” said Ryan Larson, head of equity trading at RBC Global Asset Management.

“But liquidity in markets has been so low that it does not take much nowadays to move the market up or down. Technicals and low liquidity exacerbated the move,” Larson said.

“Investors may look at Powell as if he is a Wizard of Oz, but he isn’t. He will do what the economy dictates and at the moment the economy is expanding and warrants higher interest rates,” said Karyn Cavanaugh, senior market strategist at Voya Financial.

“People are so worried about inflation as if they are still living in the 1970s, which I find misplaced. Long-term inflation at 2.5% and economy growing at more than 3% pace would be great,” Cavanaugh said.

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What did economic data indicate?

Durable-goods orders plunged 3.7% in January, largely because of a big drop in contracts for passenger planes that was expected.

An early look at U.S. trade patterns showed the trade gap in goods—services are excluded—rose 3% to $74.4 billion last month, with the increase in the nation’s trade deficit likely to act as a drag on first-quarter gross domestic product.

Home prices were still hot at the end of last year. The S&P/Case-Shiller national index rose a seasonally adjusted 0.7% in the fourth quarter of 2017 and was up 6.4% compared with a year before.

Consumer confidence surged in February, the first month Americans started to benefit from the Trump tax cuts, to the highest level since November 2000.

Which stocks were active?

Shares of AutoZone Inc. AZO, -1.55% fell by more than 11% after profits, same-store sales missed forecasts.

Comcast Corp.’s stock CMCSA, -1.94% fell by 7.4% after the global telecommunications conglomerate said it was making a $30.87 billion offer for Sky PLC UK:SKY US:SKYAY. That offer is higher than one made by Rupert Murdoch’s 21st Century Fox FOX, -3.00% , which is looking to buy the 61% of Sky it doesn’t already own. Sky shares soared 20% in London.

21st Century Fox and News Corp NWSA, -2.43% , the owner of the publisher of this report, share common ownership. The two companies, which split in 2013, each count the Murdoch family as a major shareholder.

Fitbit Inc. FIT, -0.53% tumbled 12% after revenue and earnings fell short of expectations late Monday.

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Macy’s Inc.’s stock M, -4.88% soared 3.5% after better-than-expected quarterly earnings.

Shares of Chipotle Mexican Grill CMG, -2.36% climbed 2.3% after analysts at Baird upgraded the stock to outperform from neutral.

Results from Square Inc. SQ, -2.00% , Express Scripts Holding Co. US:PCLN and Priceline Group Inc. US:PCLN were expected after the close.

How did other assets perform?

European stocks SXXP, -2.63% ended lower, while Asian stocks finished mostly negative toward the close, outside of the Nikkei 225 index NIK, +0.17% , which bucked the trend with a 1% gain.

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The yield on the 10-year Treasury note TMUBMUSD10Y, 0.655% rebounded from an earlier decline to trade just shy of 2.9%.

The ICE U.S. Dollar Index DXY, +0.63% DXY, +0.63% rose to a two-week peak, while gold ended at its lowest level in two weeks US:GCH8, off $14.20 to $1,318.60 an ounce. Crude-oil futures US:CLJ8 finished in negative territory at $63. 01 a barrel.