Investing.com –The Dow slumped sharply Tuesday after President Trump signalled a willingness to revive the trade war with China should trade talks fail.
The Dow Jones Industrial Average fell 2.25%, while the S&P 500 sank 2.4%.
The NASDAQ Composite fell 2.7% after techs joined the early selloff around midday, pushing the entire market even lower.
Trump said in a series of tweets Tuesday that a deal between the two countries would get done if possible. But the president referred to himself as a "Tariff Man," hinting that he was prepared to re-escalate tensions with China.
Financials, meanwhile, led the rout on Wall Street as a continued inversion on parts of the Treasury yield curve weighed on banks.
Inverted yields are seen as headwind for banks, weighing on their net interest margin, the difference between the interest income generated by banks and the amount of interest paid out to their lenders.
Goldman Sachs (NYSE:GS) fell 3% and Citigroup (NYSE:C) plunged 5%.
The curve between three-year and five-year Treasury notes and between two-year and five-year notes inverted on Monday, the first parts of the Treasury yield curve to invert since the financial crisis, excluding very short-dated debt.
Analysts expect the two-year, 10-year yield curve -- seen as a possible precursor to a recession -- to follow suit. The spread has already narrowed to its lowest in over a decade.
"While interest rate hikes have sent short-dated yields higher, tepid inflation and slowing economic growth expectations have kept longer-dated yields pinned down," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
"It's a signal we're getting closer to (full) inversion but we're still a fair distance from it. It's something to note ... something to be aware of but there're other facts in play."
"Right now it's a bearish sentiment. As soon as investors digested the information from the discussions, they focused on the uncertainties and lack of details," Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada said.
In tech, Apple (NASDAQ:AAPL) dropped 3.7% as supplier Cirrus Logic (NASDAQ:CRUS) trimmed its revenue outlook, adding to growing evidence of tepid iPhones sales.
-- Reuters contributed to this report.