US stocks surged on Monday following the G-20 Summit held in Buenos Aires over the weekend.
A flattening yield curve was a factor in the day's losses, while investors also digested more details on the USA and China's agreement with some skepticism.
The Dow Jones Industrial Average fell by more than 700 points in Tuesday trading, continuing a shaky start to the week prompted by confusion over a thaw in U.S. The S&P 500 Index lost 90.31 points, or 3.2%, while the Nasdaq Composite dropped 283.09 points, or 3.8%.
The Nasdaq composite lost 240 points, or 3.2 percent, to 7,201. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
The S&P 500 index lost 8 points, or 0.3 percent, to 2,782.
US futures also augured a downbeat start for Wall Street after markets were closed Wednesday to mourn the death of former President George H.W. Bush.
Small-company stocks, which investors see as more risky than large multinationals, fell more than the rest of the market.More news: 'Avengers' director says Evans' Cap days may not be over
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This is a much different characterisation of the China talks than just three days ago when Trump had dinner with China's president at a meeting of the Group of 20.
As the markets opened Tuesday, President Trump began tweeting about his administration's trade negotiations with China. Hovnanian Enterprises led most builders lower, giving up 10.3 percent to $1.10.
The S&P 500 lost 63 points, or 2.3 per cent, to 2,727. Despite the short-lived news of trade war tensions settling, markets quickly plunged the next day, marking the fourth worst decline in history.
The Dow is down 511.39 points, or 2 percent. The slide in bond yields, which affect interest rates on mortgages and other consumer loans, weighed on bank stocks. Advanced Micro Devices dropped 9.4 per cent to $21.49, while Micron Technology lost 6.4 per cent to $37.47.
Homebuilders fell after luxury homebuilder Toll Brothers issued a cautious assessment of the housing market. Morgan Stanley analysts said in a note that the market was underestimating the challenge those companies would face from Amazon Air. Benchmark U.S. crude rose 0.6 percent to $53.27 per barrel in NY. Brent crude, the worldwide standard, added 0.9 per cent to $62.22 per barrel in London.
The dollar weakened to 113 yen from 113.69 yen late Monday. The euro was little changed at $1.1342. The pound erased a gain as the threat of a vote to bring down British Prime Minister Theresa May's government looms should Parliament reject her Brexit deal. Hong Kong's Hang Seng added 0.3 percent. Silver rose 1 percent to $14.64 an ounce. Germany's DAX lost 1.1 percent, while France's CAC 40 dropped 0.8 percent.