Bond market sends warning signal to Wall Street

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Why the pessimism over that obscure-sounding shift? Historically, when short-term rates rise above longer rates – which is dubbed an "inversion of the yield curve" – it signals an economic slowdown is coming.

"Investors are questioning whether the Treasury market is telegraphing a more material economic slowdown," says Quincy Krosby, chief market strategist at Prudential Financial.

But fears of a coming recession weren't the only thing worrying investors. Other fears that drove the Dow down 3.1 percent to 25,027 Tuesday include:

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Fading glow of trade cease-fire

The optimism following the cease-fire on trade between the U.S. and China over the weekend at the G-20 summit lasted just one trading day. Now there's rising skepticism about whether a deal between the world's two biggest economies can be reached during the 90-day pause.

That's causing a lot of uncertainty for investors and is exacerbating worries about slowing growth, as tariffs result in higher prices for goods, which hurts sales and earnings of U.S. companies.

"The post G-20 relief rally in stocks seems to be fizzling out," Oliver Jones of investment research firm Capital Economics says.

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Stocks fall below key price floor

The broad Standard & Poor's 500 stock index, which lost 3.2 percent, also fell below a key price level that suggests its long-term trend of rising prices might be coming under assault. The large-company stock gauge dipped below its average price over the past 200 days, which prompted jittery investors to sell stocks more aggressively.

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