Stock indexes closed sharply lower on Tuesday after Federal Reserve Chair Jerome Powell told Congress the central bank will likely need to raise interest rates more than expected as it seeks to rein in stubbornly high inflation.

Powell sent investors fleeing after he told lawmakers earlier in the day that the Fed is prepared to hike rates in larger steps if economic data suggests tougher measures are needed to control rising prices.

The Dow Jones Industrial Average tumbled 574.98 points, or 1.7%, to 32,856.46, the Nasdaq slid 1.3% and the S&P 500 dropped 1.5%.

The Fed is prepared to move in “larger steps” if the “totality” of incoming information suggests tougher measures are needed to control inflation, Powell told lawmakers.

The remarks were his first since inflation unexpectedly jumped in January and the government reported an unusually large increase in payroll jobs for the month.

Traders drastically increased their bets of a 50-basis-point rate hike in March after Powell’s comments, with money market futures pricing a more than 40% chance of such a move, from 23% before the remarks. 

Meanwhile, Fed fund rates were seen peaking at 5.56% in September compared to 5.47% earlier.

The idea of higher rates for longer is a “headwind” and “hearing it directly from Powell is a little different to inferring it from the data,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

“From a risk-rewards standpoint investors have to recalculate their desire to be invested with this new paradigm,” said Adam Sarhan, chief executive of 50 Park Investments, based in Orlando, Florida. “It’s the realization the Fed is going to err on the side of being more hawkish.”

Weighing on the tech-heavy Nasdaq, the yield on two-year Treasury notes, which best reflects short-term rate expectations, rebounded to its highest since 2007 at 4.96%. 

Rising bond yields tend to weigh on equity valuations, particularly those of growth and technology stocks, as higher rates reduce the value of future cash flows.

Investors are awaiting data later this week that is expected to show nonfarm payrolls increased by 200,000 in February, compared with the much stronger-than-expected 517,000 jobs reported in January.

“A 50 bps hike in the next meeting is possible, but it is going to be dependent on the payrolls not slowing down and CPI numbers showing that the disinflation progress we’ve made is stalling,” said Scott Ladner, chief investment officer at Horizon Investments.

Among individual stocks, Rivian Automotive tumbled 15% after the electric automaker unveiled plans to sell bonds worth $1.3 billion.

Meta Platforms fell 0.3% after Bloomberg News reported the company will cut thousands of jobs as soon as this week in a fresh round of layoffs.

Snapchat owner Snap extended gains by 0.5% after Sen. Mark Warner said a bipartisan group of 12 senators will introduce legislation that would give Commerce Secretary Gina Raimondo new powers to ban Chinese-owned video app TikTok.