U.S. equity indexes finished sharply lower Thursday, marking a third straight decline, after President Donald Trump said he would impose tariffs on steel and aluminum imports, raising concerns of protectionist trade policies that could hurt U.S. corporations and consumers.

The trade-tariff news also came as the market was following a second round of testimony from Federal Reserve Chairman Jerome Powell, which concluded around noon Eastern.

See:Powell’s second day of testimony on Fed policy: Live blog and video

What are the main benchmarks doing?

The Dow Jones Industrial Average DJIA, -2.87% tumbled about 420.22 points, or 1.7%, at 24,608.98, with blue chips down 586,64 points, or 2.3%, at session lows, led by a sharp decline in plane manufacturer and industrial giant Boeing Co. BA, -3.42% .

The S&P 500 SPX, -2.22% gave up 36.16 points, or 1.3%, to 2,677.67, led by selling in the industrials, technology and financials sectors, which all fell by at least 1.7%. All 11 sectors finished trading in the red, underscoring a downdraft that was broad-based.

The Nasdaq Composite Index COMP, -1.72% , meanwhile, declined 92 points, or 1.3%, at 7,180.56.

All three benchmarks kicked off March trade with their worst daily decline in about three weeks, with the Nasdaq Composite breaking below its 50-day moving average at 7,173.41, a closely watched level by market technicians, which is used to determine short-term momentum in an asset.

The session’s rout for stocks followed an ugly month for all three benchmarks in February. The Dow gave up 4.3% in February, notching its biggest monthly drop in more than two years and paring its advance over the past 12 months to 20%.

For the year, the S&P 500 hung on to a 0.2% year-to-date gain, but the Dow is 0.5% lower so far in 2018. The Nasdaq is still up about 4% this year, according to FactSet data.

A broad flight away from assets perceived as risky and into bonds was highlighted by the yield on 10-year Treasury note TMUBMUSD10Y, 0.663% falling to 2.80% from 2.91% a day ago, marking its largest daily yield decline since Sept. 5. Bond prices fall as yields rise.

Meanwhile, the Cboe Volatility Index VIX, +17.15% spiked on Thursday, jumping 23% to hit a two-week high at 24.76 as stocks sold off. Thursday’s climb puts the so-called fear index, which tends to rise as stocks retreat, above its historic average at 20.

What are driving markets?

Trump told steel and aluminum executives gathered at the White House on Thursday that the U.S. would announce tariffs on imports of those products next week. Trump said the U.S. would set tariffs of 25% for steel and 10% for aluminum.

Read: Trump steel tariffs to hit these 8 countries the hardest (China is not one of them)

Import tariffs can push the price of goods and services up, and could spark retaliation from other countries, exacerbating concerns for markets about inflation pressures running high, market participants said.

Stronger-than-expected economic releases earlier lent support to markets, with the Institute for Supply Management’s manufacturing index hitting a 13-year high, initially helping push the equity benchmarks higher in early Thursday trade.

What are strategists saying?

“Maybe you’re doing a service for few steel and aluminum companies but you are crushing the rest of the market because people know that this is not what people want to see and it’s going to be a big problem because this ripples through the market and if you are [General Motors Co. GM, -6.47% ] you could be suddenly paying more for aluminum or steel,” said Ian Winer, head of equities at Wedbush Securities.

“Either your margins are going to be hit or you’re raising prices,” Winer said. The Wedbush trader said the talk of tariffs might prompt a similar response from China or other countries that could hurt U.S. corporations.

“I think it’s a combination of the uncertainties that are becoming a little bit more apparent,” said Maris Ogg, president at Tower Bridge Advisors.

“January and part of February we were in the euphoria phase and I think people are realizing that we are wrestling with the uncertainty of Powell, and the market never likes uncertainty,” Ogg said. She added that the market selloff might be driving down shares to multiples that are more attractive.

“The support/resistance line for the 10-year Treasury is 2.82%, in my calculations. As the equity markets get whacked, the 10-year could head to the next support/resistance line of 2.72% in short order,” wrote Mark Grant, chief global strategist at B. Riley FBR, in a Thursday note.

Opinion:Powell’s first faux pas came quick

And see:4 financial-market takeaways from Powell’s debut

Jerome Powell: Economic Outlook Has Improved Since December

What data are in focus?

The Institute for Supply Management said its manufacturing index rose to 60.8% in February, up from 59.1% in January, to reach the highest level since May 2004.

Initial U.S. jobless claims fell by 10,000 to 210,000 in the seven days ended Feb. 24, the lowest level in nearly 50 years.

A strong economy and tight labor market has contributed to higher inflation, with the personal-consumption expenditure inflation index up 0.4% in January. The yearly increase in the PCE was flat at 1.7% for the third month in a row, below the Fed’s 2% target.

A January report on construction spending was unchanged.

Check out:MarketWatch’s Economic Calendar

Which stocks look like key movers?

Trump met with executives at companies including United States Steel Corp. X, -8.22% , Nucor Corp. NUE, -5.75% and Century Aluminum Co. CENX, -10.59% .

Shares of U.S. Steel closed up 5.8%, those for Nucor climbed by 3.3%, while Century Aluminum’s stock finished up by 7.5%.

Shares in L Brands Inc. LB, -4.24% tumbled nearly 14% after the Victoria’s Secret parent late Wednesday gave a quarterly outlook that appeared to disappoint Wall Street.

Salesforce.com Inc.’s stock CRM, -1.39% rose 2.7% after the software company’s quarterly results beat expectations.

Best Buy Co. BBY, -1.08% earnings and revenue came in above expectations, sending shares 4% higher.

Kohl’s Corp. KSS, -6.45% shares dropped 5.1% after disappointing quarterly earnings.

Barnes & Noble Inc. US:BKS shares closed 3.3% lower after it reported a fiscal third-quarter loss.

Separately, reports covering U.S. auto sales for February rolled out throughout the session. February sales for Ford Motor Co. F, -4.70% were down 6.9% to 194,132, while FCA US, the U.S. unit of Fiat Chrysler Automobiles NV FCA, -3.09% sales fell 1% in February to 168,326 vehicles. Shares of Fiat finished 2.8% lower while those for Ford closed fell 3%.

What are other assets doing?

European equity gauges SXXP, -3.22% wrapped up sharply lower, while Asian markets finished mixed. Gold futures closed at its nadir for 2018 US:GCJ8 and oil futures US:CLJ8 settled at a two-week low, as the ICE U.S. Dollar Index DXY, +0.76% edged up.

—Victor Reklaitis contributed to this article