NEW YORK—Stocks slumped Tuesday after shares of beleaguered banks tumbled again and worries worsened about the economy.
Rising fear sent yields sinking in the bond market, while Wall Street waited for the Federal Reserve’s latest move on interest rates and Washington edges closer to what would be a catastrophic default on U.S. government debt.
The S&P fell 1.2 percent after paring a steeper loss. The Dow Jones Industrial Average dropped 367 points, or 1.1 percent, after earlier being down as many as 615 points. The Nasdaq composite sank 1.1 percent.
Some of the sharpest drops came from smaller- and mid-sized banks, which have been under heavy scrutiny as the banking system shows cracks under the weight of much higher interest rates. PacWest Bancorp dropped 27.8 percent, Western Alliance Bancorp fell 15.4 percent, and Comerica sank 12.4 percent….