All three main indices fell into negative territory, before noon and continued to train lower.
Dow ( INDU ) traded around 150 points, or 0.6%, lower, while S&P 500 ( SPX ) and Nasdaq Composite ( COMP ) were down 0.5% and 0.7%, respectively.
With three trading days remaining in August, the Dow is in pace with a 4% decline. S&P and Nasdaq are looking at a fall of 3.8% and 4.5% this month, according to Refinitive.
Bond rates continued to fall as the demand for safe havens such as treasuries remained high. The 1
0-year bond yield, last at 1.4794%, fell to another low year. The two-year and 10-year yield curves remain inverted, flashing a historic low economic indicator. Earlier Tuesday, the yield curves of 3 months and 10 years were at their most reversed level since 2007, according to Refinitiv.
"Hope triumphed over realism yesterday, and realism is fighting back," today wrote Marc Chandler, chief marketing strategist at Bannockburn Global Forex.
On Monday, President Donald Trump said that China was keen to return to the negotiating table. Shares declined in response, reversing some of the losses they had incurred on Friday as the trading spat escalated. However, this optimism seems to have diminished some.
Trump, who has repeatedly asked the Federal Reserve to cut interest rates to support the ailing economy, tweeted Tuesday afternoon that the Fed "loves to watch our manufacturers struggle with their exports for the benefit of other parts of the world. "
Former New York Fed President William Dudley wrote in an op-ed about Bloomberg that Trump's trade war with China is jeopardizing the country's economic outlook, and in turn is pushing the Fed to cut interest rates.
"Central Bank officials face a choice: allow the Trump administration to continue down a disastrous path to escalating trade war, or send a clear signal that if the administration does, the president, not the Fed, will bear the risk – including the risk of losing the next election, "Dudley wrote.
Two layers of notes to look at: Philip Morris ( PM ) and Altria ( MO ) have confirmed that they are in merger talks. The Philip Morris share is down more than 6%, while Altria's shares rose more than 1%.
Consumer confidence for August was stronger than expected at 135.1, against the refinitive consensus forecast of 129.5.
After a strong July, economists expected consumer confidence to fall. Although the August level is lower than last month, consumers are generally safe.