Stocks crumbled after a U.S. health official advised against a premature economic reboot, and as investors weighed a grim forecast from regional heads of the central bank. Treasuries soared, as did the US dollar.
The S&P 500 sustained losses as Dr. Anthony Fauci, the top official of the nation's infectious disease center, said states reopening too soon could "get you back on the road trying to get economic recovery."
At the same time, some officials at the Federal Reserve disclosed the outbreak and a partial close-down would cause major bankruptcies that could produce a permanent scar.
The six-day winning streak of the Nasdaq was cut Tuesday, as US stocks retreated following Fauci 's warning. At 23,764.78 volume, the Dow Jones Industrial Average was down 457.21 points (1.89 per cent).
The wider-based S&P 500 dropped 60.20 points (2.05 percent) to 2.870.12 and the tech-heavy Nasdaq Composite Index shed 189.79 points (2.06 percent) to finish at 9.002.55 after rising in the last six days.
Optimism in an economic rebound and a major stimulus initiative has helped the benchmark index climb about 33 percent in March from the lows of a pandemic-driven selloff.
Wall Street's panic gauge tumbled for the fourth day running, hitting a 10-week low, even as analysis showed American consumer prices dropped by most since the Great Recession in April.
Stocks set to get a lift from economies that are expected to restart - properties, retail, airlines and banks - pulled down the key averages. Disney was down 3 percent, Nike weakened 2.8 percent and JPMorgan shed 3.2 percent. Mall operator Simon Property Group lost a 10 percent rally to settle in the red zone after the bell.
The catastrophic collapse of company losses and home-stay orders resulted in April 's unprecedented 20.5 million job losses, tripling the jobless rate to 14.7 percent, the highest since the 1930s Great Depression.
A main indicator of US consumer prices dropped the most in April. A sustained downward trend in consumer prices would stimulate concerns about market deflation, intensifying worries that recovery from the deep economic downturn will be very slow.
Also putting heavy weight on the industry was a 6.3 percent decline in BlackRock Inc, after its top shareholder PNC Financial Services Group Inc offered to sell its entire 22 percent stake in the largest asset manager in the world.
The market is a bit too upbeat about what the economy will look like this summer, Steven Blitz, TS Lombard's chief US economist, said.