The Dow Jones Industrial Average fell 350.76 points, or 1.03 percent, to 33,596.34. The S&P 500 lost 57.58 points, or 1.44 percent, to 3,941.26. The Nasdaq Composite Index slid 225.05 points, or 2.00 percent, to 11,014.89.
Ten of the 11 primary S&P 500 sectors ended in red, with energy and communication services down 2.65 percent and 2.57 percent, respectively, leading the laggards. Utilities rose 0.66 percent, the lone gaining group.
The above market reactions came as chief executives from several bank giants warned of the risk of a U.S. economic recession.
JPMorgan Chase CEO Jamie Dimon on Tuesday warned that stubbornly high inflation could drag the U.S. economy into a recession next year as steep prices cause consumer spending to dry up.
Goldman Sachs CEO David Solomon said there is "very reasonable possibility" that the economy enters recession next year, warning of "bumpy times" ahead.
On Monday, Wall Street's major averages fell sharply with the Dow closing down more than 480 points, as strong U.S. service sector data raised concerns that the Federal Reserve may have to raise rates more than expected.
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