Stock markets dropped dramatically on Tuesday over trade concerns and fears of a slowing economy, with the Dow Jones Industrial Average sinking more than 800 points (3 percent), its largest plunge since October.

The S&P 500 was down 63 points, or 2.3 percent.

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The drop occurred as the yield curve flattened, and looked at risk of inverting, in what is considered a common early indicator of recessions.

In an inverted yield curve, bond traders expect higher returns in the short term than in the long term, an indication that the market expects the economy to be worse in the future.

The financial sector led the plunge in the market.

But the mood on trade soured after Trump declared himself "a Tariff Man" in a threat to Xi if trade talks did not work out.

Recent surveys of economists find that a majority expect a recession in the coming two years, as the "sugar high" from the GOP tax cut and a bipartisan spending increase wears off.