Nathaniel Meyersohn

(CNN Money) -- Volatility gripped Wall Street on Tuesday.

The Dow fell as much as 430 points -- 1.6% -- on fears about a political crisis in Italy and renewed trade tensions between the United States and China. The index turned negative for the year.

The S&P 500 and the Nasdaq slipped 1.3% and 0.7% apiece.

Italy is headed for new elections, and investors worry the result could throw the European Union into turmoil. The yield on Italy's debt surged as investors demanded higher payouts in return for taking on risk.

In Wall Street's worst-case scenario, Italy, the third-largest economy in the European bloc, would vote to leave the euro.

"It's got the earmarks of a disgruntled Italy," said Arthur Hogan, chief market strategist at B. Riley FBR. "We've gotten to the point now where it's catching people's attention."

The White House also announced Tuesday that it would impose 25% tariffs on $50 billion worth of goods from China and place new limits on Chinese investments in the United States. The move caught investors by surprise. Treasury Secretary Steven Mnuchin said a trade war with China was "on hold" less than 10 days ago.

Signs of fear showed up across the market on Tuesday.

The VIX, Wall Street's fear gauge, spiked 17% to its highest level since May 4. CNNMoney's Fear & Greed Index pushed into fear territory. A week ago, the index was flashing greed.

Investors rushed to safety in bonds. The yield on the 10-year US Treasury fell sharply to 2.81%.

Last month, the 10-year yield crossed 3% for the first time since 2014 as the Federal Reserve raises interest rates. Yields move in the opposite direction of prices.

Banks slumped on the bond rally. Falling bond yields can make it harder for banks to make money on the interest they charge for loans.

JPMorgan Chase dropped 4%, while American Express and Goldman Sachs lost 3.5%.

As yields fell, investors headed to higher-dividend stocks.

Coca-Cola was the only positive company on the Dow. The utility sector, another safety play, was the sole sector on the S&P 500 in the green.

"It's a typical risk-off kind of day," Hogan said.

Meanwhile, falling oil prices put pressure on energy stocks.

Oil prices have slumped around 10% since Saudi Arabia's energy minister said on Friday that Saudi-led OPEC and Russia would pump more oil. US crude dipped 2.5% to $66 a barrel.

--CNNMoney's Matt Egan contributed to this story.