Volatility hit Wall Street on Tuesday.
The Dow plummeted by more than 392 points, or 1.6%, due to fears of political unrest in Italy and renewed trade uncertainty between the US United States and China. It was the worst day for the Dow since April 24th.
The S & P 500 and the Nasdaq slid 1
Related: Netflix, Amazon and Facebook are a (less dark) light on a dark day for equities
Italy is facing new elections and investors fear the outcome could upset the European Union. Investors suffered from Italian debt and demanded higher yields to take additional risks.
Tensions in Italy spread to the US markets. In the worst case of Wall Street, Italy, the third largest economy in the European bloc, would vote to leave the euro.
"It has the hallmarks of an angry Italy," said Arthur Hogan, chief market strategist at B. Riley FBR. "We have now reached the point where people's attention is drawn to."
The White House also announced Tuesday that it will raise 25% of China's $ 50 billion in customs duties and set new limits on Chinese investment in the United States. The move surprised investors. Finance Minister Steven Mnuchin said that a trade war with China was "put on hold" less than 10 days ago.
There were signs of alarm in the market on Tuesday.
Related: Market insecurity is back
The VIX ( Wall Street fear gauge, spiked nearly 31% to its highest level since May 4. CNNMoney's Fear & Greed Index penetrated into distressed areas. A week ago, the index blinked greed. )
Investors rushed into bonds. The 10-year US Treasury yield fell sharply to 2.77%. Yields are moving in the opposite direction of prices.
Last month, the 10-year yield exceeded 3% for the first time since 2014. Longer-term yields have risen steadily as the Federal Reserve raises interest rates. Higher interest rates weigh on the value of fixed payouts of bonds.
The bond rally led to a steep bank sale. Falling yields can make it harder for banks to raise money for the interest they charge on loans.
JPMorgan Chase ( fell by 4%, while ) American Express ( and ) Goldman Sachs GS lost 3% to lower the Dow. Morgan Stanley ( and ) State Street ( were the worst performers on the S & P 500. )
As yields fell, investors turned to high-dividend equities such as utilities and real estate.
Coca-Cola ( was the only company on the Dow that ended the following day. ) Dow Jones Utilities Average ( also closed. )
"It's a typical risk-free day," Hogan said.
Meanwhile, a decline in oil prices weighed on energy stocks.
The price of oil has fallen 10% since the Saudi Arabian Energy Minister said on Friday that Saudi Arabia's OPEC and Russia would pump more oil. US crude fell 1.6% to just under $ 67 a barrel.
– CNNMoney's Matt Egan has contributed to this story .
CNNMoney (New York) First published May 29, 2018: 12:04 pm ET