U.S. stocks closed sharply lower on Tuesday, falling for a second day as the first major sell-off of the new year intensified.

The Dow Jones industrial average dropped 362.59 points to finish at 26,076.89, with UnitedHealth as the biggest decliner. The 30-stock index also posted its biggest percentage decline since May. It fell 411.06 points at its session low.

The pulled back 1.1 percent to 2,822.43, with health care as the worst-performing sector. The index also snapped its longest stretch ever without back-to-back declines of at least half a percent. It also had its worst day since August

The Nasdaq composite fell 0.9 percent to close at 7,402.48.

"We've had a unilateral move higher [in stocks] to start things off and people are realizing this is not sustainable," said Art Hogan, chief market strategist at B. Riley FBR. "You're also seeing some cracks in the global story with interest rates rising."

The Dow fell 177 points on Monday, on the back of a rise in the 10-year treasury yield, raising concerns that higher interest rates could douse the bull market. The Dow, along with the S&P 500, posted its worst decline of the year on Monday.