2018.05.2920:15:00UTC+00Wall Street Fell as Italy’s Political Turmoil Roils Global Markets

U.S. stocks plunged on Tuesday amid political turmoil in Italy that sent the euro tumbling and ongoing difficult trade talks with China. Bank stocks led the decline.

The Dow Jones industrial average fell 391.64 points — or 1.58 percent — to end at 24,361.45 amid losses in Goldman Sachs, Boeing, and J.P. Morgan Chase. At its lows, the index lost more than 500 points, or two percent. The S&P 500 fell 1.16 percent to close at 2,689.86, while the Nasdaq composite fell 0.5 percent to finish at 7,396.59.

Financials led the declines, down 3.4 percent, tracking falling Treasury yields. Industrials and materials fell 1.6 percent and 1.8 percent respectively. Real estate and utilities shares were the only bright spot on Wall Street, suggesting a defensive posture.

With two more sessions before the end of month, the three gauges are still on track for modest monthly gains in May.

Stocks extended their losses throughout the day as European exchanges closed and the euro dropped further against the dollar.

Concerns about a global credit blight and anemic interest rates appeared to weigh on U.S. financial stocks, sending shares of the nation's largest banks tumbling. Goldman Sachs, J.P. Morgan, Citigroup, Morgan Stanley and Bank of America all lost over three percent. The Financial Select Sector SPDR (XLF) exchange-traded fund declined 3.34 percent, below its 200-day moving average.

Banking investors could be nervous that a decline in global credit could lead to collateral damage to holders of international bonds, though widespread strengthening in global government debt also dampened the banking outlook.

The Cboe Volatility Index (VIX) — a measure of market anxiety — rose to highs above 18. U.S. stock markets were closed Monday for Memorial Day.