U.S. stocks plunged Tuesday as the prospect of higher-for-longer interest rates and letdowns from big-box retailers dampened the mood on Wall Street to start a busy holiday-shortened week.

The U.S. stock and bond markets were closed on Monday for Presidents Day.

The S&P 500 (^GSPC) nosedived 2%, falling below the key 4,000 level, while the Dow Jones Industrial Average (^DJI) shed nearly 700 points, or 2.1%. The technology-heavy Nasdaq Composite (^IXIC) tanked 2.5%.

Investors evaluated quarterly financials from Walmart (WMT) and the Home Depot (HD) for updates on the health of the U.S. consumer, which has so far remained resilient in the face of stubbornly high inflation — most recently evidenced by January's stunning retail sales data out last week.

Walmart, however, warned Tuesday morning that it was cautious about the outlook for the economy and said customers pressured by inflation shopping for lower-priced items may negatively impact margins. The retail giant also issued full-year earnings guidance below Wall Street estimates. Shares closed slightly higher after paring losses from early in the session.

"The consumer is still very pressured, and if you look at economic indicators, balance sheets are running thinner and savings rates are declining relative to previous periods," Walmart chief financial officer John David Rainey said during an earnings call. "And so that’s why we take a pretty cautious outlook on the rest of the year."

The picture was similar for home improvement retailer The Home Depot, which also reported disappointing fourth quarter results and said it was in for a challenging 2023. Shares slid 7.1%.

Speculative technology stocks, which led the rally higher to start the year, were taking a beating on Tuesday. Cathie Wood's Ark Innovation ETF (ARKK) plopped 6.1%. Tesla (TSLA) spiraled down 5.3% after rising for six back-to-back weeks.

Morgan Stanley's Mike Wilson wrote in Tuesday morning note that "the bear market rally that began in October from reasonable prices and low expectations has morphed into a speculative frenzy based on a Fed pause/pivot that isn’t coming."