Economic security

Dow tumbles nearly 400 points on Italy fears and US-China trade tensions

The Dow plunged more than 392 points, or 1.6%, on fears about political turmoil in Italy and renewed trade uncertainty between the United States and China. It was the worst day for the Dow since April 24.

The S&P 500 and the Nasdaq slipped 1.1% and 0.5% apiece.

Italy is headed for new elections, and investors worry the result could throw the European Union into turmoil. Investors soured on Italy's debt, demanding higher yields in return for taking on added risk.

The tension in Italy spread to US markets. In Wall Street's worst-case scenario, Italy, the third-largest economy in the European bloc, would vote to leave the euro.

"It's got the earmarks of a disgruntled Italy," said Arthur Hogan, chief market strategist at B. Riley FBR. "We've gotten to the point now where it's catching people's attention."

The White House also announced Tuesday that it would impose 25% tariffs on $50 billion worth of goods from China and place new limits on Chinese investments in the United States. The move caught investors by surprise. Treasury Secretary Steven Mnuchin said a trade war with China was "on hold" less than 10 days ago.