The S&P 500 lost 2.8 percent of its value, and the Nasdaq fell by 3.3. percent.
But the market's optimism faded today amid published reports questioning the scant details out of the Trump-Xi talks and growing skepticism that Beijing will yield to USA demands anytime soon. US President Trump also added further doubt when he tweeted that if future negotiations don't go well, he'll become a 'Tariff man'. Citigroup fell 5.4 percent to $61.63.
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. -China trade talks. The inversion of a portion of the Treasury yield curve for the first time since 2007 reinforced the impression that markets are approaching the end of the current cycle.
"It's fears about the inverted yield curve and what that means for the economy and is it a precursor to a recession", said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.
The decline on the blue-chip Dow came just one day after a 300-point rally, with investors cheering news that President Donald Trump and China's President Xi Jinping had settled their differences at the G-20 economic summit over the weekend.
Yields on two-year and three-year bonds held above the five-year yield for a second day, while the benchmark 10-year yield hit its lowest since mid-September as demand for longer-dated Treasuries rose on bets of an approaching economic slowdown.
The Dow Jones Small-Cap Growth TSM Index closed at 9,239.13 for a loss of 418.63 points or -4.33%. -China trade truce reached over the weekend wasn't all it was cracked up to be.
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The trade dispute has rattled markets in recent months as signs emerged that it has begun affecting corporate profits.
The US stock and bond markets will be closed on Wednesday to mourn the death of former US President George H.W. Bush.
Similarly, the S&P 500 dropped by 2.5pc with financials dropping by 4.0pc and industrials dropping by 3.5pc.
"Maybe we're not going to get as dovish a Fed as some think", said Joseph LaVorgna, chief economist, Americas at Natixis in NY.
The jitters helped drive demand for government bonds.
Financial shares .SPSY , which are particularly sensitive to bond market swings, dropped 4.4 percent. The slide in bond yields, which affect interest rates on mortgages and other consumer loans, weighed on bank stocks.
Oil prices rose. OPEC members are expected to agree at a Thursday meeting to cut output in 2019. Brent crude, the worldwide standard, added 0.9 percent to $62.22 per barrel in London. A report issued Tuesday from a Swiss freight company noted that global trade grew just 0.3 percent last month, compared to 3.1 percent for November 2017. The euro declined to $1.1330 from $1.1343.