Stocks fell Tuesday, resuming the selling seen late last week, as trade worries were reignited overnight by China.

The Dow Jones Industrial Average lost 504 points, or 1.1%. The S&P 500 lost 1.3%, while the Nasdaq Composite shed nearly 2%.

The selling was led by the AI shares that have driven the bull market, but also were the biggest losers during Friday's rout. Nvidia lost more than 3%. Tesla and Oracle lost 2.5% and 1.4%, respectively.

China imposed sanctions on five of South Korea's Hanwha Ocean's U.S. subsidiaries. This will forbid organizations and individuals in China from doing business with the affected companies. The move, the Chinese government said, aims at strengthening China's security.

U.S. Treasury secretary Scott Bessent said Monday to the Financial Times that the move to impose penalties on U.S. subsidiaries signals China's economic weakness, adding that the country's leaders "want to pull everybody else down with them."

The Cboe Volatility index — Wall Street's so-called fear gauge — rose above Friday's closing level, signaling renewed angst on Wall Street that there will be no easy solution to this China trade fight and hedging for future losses using options may make some sense. The 'VIX hit a high above 22, which was also a four-month high.

Trade tensions have been rising since late last week, when President Donald Trump threatened to place an additional 100% tariff on Chinese imports, sending stocks sharply lower. The Dow on Friday lost more than 800 points, while the S&P 500 posted its biggest one-day loss since April 10.

On Sunday, however, Trump dialed back his rhetoric, noting in a Truth Social post: "Don't worry about China, it will all be fine."

That comment sent stocks soaring on Monday. The S&P 500 and Dow each jumped more than 1% on the day, marking the former's biggest one-day gain since May 27. The Dow had its best day since Sept. 11 and broke a five-day losing streak. Monday's rebound retraced more than half of the S&P 500′s decline on Friday, and two-thirds of the Dow's steep losses.

Source : CNBC