US stocks
File photo: The S&P 500 fell as much as 3.4% on Tuesday before paring losses. The 10-year Treasury yield dropped below 0.55%. Image Credit: Gulf News File

New York: US stocks tumbled the most in almost three weeks and Treasury bonds rallied as turmoil in the crude oil futures market triggered a fresh bout of risk aversion.

The S&P 500 fell as much as 3.4% before paring losses, with equity investors shrugging off signs that Congress is close to a fresh spending bill to combat the impact of the pandemic.

The historic rout in crude rattled markets for a second day, with the June contract plunging more than 50% after May contracts expiring Tuesday sank below zero for the first time in history. The 10-year Treasury yield dropped below 0.55%.

The gut-wrenching oil debacle may signal the hit to the global economy will be far worse than anticipated by investors who sent the S&P 500 up 28% from its March lows. While major economies around the world take tentative steps toward reopening, signs the U.S. is close to bolstering spending did little to offset fresh concerns over the depth of the recession.

"Markets appear to be taking a breather after that rapid recovery," said Candice Bangsund, portfolio manager of global asset allocation at Fiera Capital Corp. "A lot of this is being driven by the profound and historic collapse in crude prices. That's largely been the catalyst that's roiled already fragile market sentiment."

President Donald Trump said his administration is working on a plan to make money available to the oil industry to prevent the loss of jobs after prices plunged.

Corporate earnings add to woes. Deep profit declines often come with no company insight into the remainder of the year and mounting signs that capital investment is set to plunge. Netflix, Texas Instruments and Chipotle are among companies reporting after the close Tuesday.

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Meanwhile, President Trump said he'll sign an executive order temporarily suspending immigration into America as the country tries to contain the spread of the coronavirus. The news came even amid more signs that the outbreak is slowing in hard-hit areas. And in Asia, reports that North Korea's Kim Jong Un was in critical condition added to the uncertainty. Shares in the region slumped. The dollar climbed against most major currencies, with the won and ruble tumbling and the yen edging up.

Elsewhere, the kiwi slumped after Reserve Bank of New Zealand Governor Adrian Orr said he was open-minded on the idea of directly monetizing sovereign debt.