European markets closed lower yesterday: London's FTSE fell 0.6per cent, Paris dropped 0.8 per cent and Frankfurt shed 1.1 per cent.
The drop in United States stocks also came amid a signal from bond markets that has traditionally been a precursor to a recession.
Bond prices rose sharply. This has not occurred since 2007.
Tuesday's losses more than erased the gains of the previous two trading days, when cautiously optimistic investors bid up stock prices amid hopes that USA and China were resolving their trade dispute. "President Xi and I want this deal to happen, and it probably will".
Financial shares .SPSY , which are particularly sensitive to bond market swings, dropped 4.4 percent.
"The sense is that there's less and less agreement between the two sides about what actually took place", Delwiche said. Seoul's Kospi gave up 0.8 percent to 2,101.31 and India's Sensex was 0.6 percent lower at 35,902.74.
The trade dispute has rattled markets in recent months as signs emerged that it has begun affecting corporate profits. -China trade cease-fire. That revived fears their tariff battle could chill global economic growth. The jitters helped drive demand for government bonds. The yield on the 10-year Treasury fell to 2.92 per cent. The slide in bond yields weighed on bank stocks.
"Cyclical sectors like technology, financials and industrials led markets lower, while defensive areas like utilities and real estate weathered the storm best". Ten-year yields are below 3 percent.
Homebuilders fell after luxury homebuilder Toll Brothers issued a cautious assessment of the housing market.
About 9 billion shares changed hands in USA exchanges, above the 7.7 billion-share daily average over the last 20 sessions.
Apple lost 4.4 percent to $176.69 after the consumer electronics giant was downgraded by HSBC analysts, citing the possibility that iPhone volume and value growth may moderate due to a saturated mobile phone market.
Discount retail chain Dollar General slid 8.2 per cent to $102.54 after the company reported weak quarterly results.
ENERGY: Oil prices headed higher ahead of an OPEC meeting on Thursday, where members are expected to agree to cut output in 2019.
Small-company stocks, which investors see as more risky than large multinationals, fell more than the rest of the market. Benchmark U.S. crude rose 0.6 per cent to $53.27 per barrel in NY.
Brent crude, the worldwide standard, added 0.6 percent to close at $62.08 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 S&P 500 lost 61 points, or 2.2 percent, to 2,729.
In Asia early Wednesday benchmarks fell by no more than 1.5 percent, the loss for the Hang Seng index in Hong Kong, which was at 26,860.43 by mid-morning.
Gold gained 0.6 percent to $1,246.60 an ounce. The S&P ASX/200 in Australia gave up 1 per cent.