"But even if the tariffs don't happen, many of those stocks are performing well".
Investors also reacted to more earnings from retailers. It lost 1.2% on Tuesday. Meanwhile, after falling $4.90 to $1,304.10 an ounce in the previous session, gold futures are inching up $0.10 to $1,304.20 an ounce. The dollar rose to 108.88 yen from 108.24 yen.
The market's main measure of short-term volatility, the CBOE Volatility index, spiked to its highest level since April 25.
Italy's political crisis and related financial market turmoil is a reminder unexpected happenings outside the USA can still cause turbulence at home.
Shares of large US banks were also pressured by downbeat guidance from JPMorgan Chase & Co (Xetra: 850628 - news) and Morgan Stanley (Xetra: 885836 - news). The S&P 500 fell 1.1 percent, while the Nasdaq composite fell 0.5 percent. The Dow Jones industrial average rose 209 points, or 0.9 percent, to 24,570. South Korea's Kospi advanced 0.6 percent to 2,423.01.More news: Real Madrid begin search for Zinedine Zidane's successor
The Italian government's successful auction of five- and 10-year bonds also assuaged concerns about the country's ability to finance itself after a sell-off in bonds on Tuesday resulted in the biggest one-day surge for two-year yields in 26 years.
Australian shares fell notably amid broad-based selling as investors rushed to safe-haven assets such as U.S. Treasuries.
Italy's FTSE MIB stock index climbed 1.8 percent after a 2.7 percent drop a day earlier.
Milan-listed equities snapped a five-day losing streak and bounced nearly 2 percent .FTMIB while short-dated Italian bond yields IT2YT=RR - a sensitive gauge of political risk - fell more than half a percent from half-decade highs.
ENERGY: Benchmark U.S. crude fell 57 cents to $67.31 per barrel in electronic trading on the New York Mercantile Exchange while Brent crude, used to price worldwide oils, added 78 cents to $76.08 per barrel in London.More news: Chelsea likely to sell Courtois
Investors dumped Italian bonds.
On the data front, the day's economic reports proved to be a mixed bag.
The Dow is down 357.77 points, or 1.4 per cent.
The DAX 30 index in German was down 1.53 per cent, and France's CAC 40 index fell 1.29 per cent. Both stocks fell about 4 percent Tuesday. The events have evoked memories of the 2011-2012 euro debt crisis, with potentially huge implications for the single currency. Morgan Stanley shares dropped 5.8 percent, the second-largest percentage decline on the index.
Oil prices fell 7.6 percent in five days following reports OPEC countries and Russian Federation might start producing more oil soon. On the mainland, the Shanghai composite gained 0.61%. Its first-quarter report was better than expected thanks in part to strong online sales.More news: Trump hits back at Trudeau's criticism of 'punitive' U.S. metal tariffs