NEW YORK (AP) — Stocks closed lower as shares of beleaguered banks tumbled again and worries about the economy worsened.

The rising fear sent yields sinking in the bond market Tuesday, 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 500 fell 1.2% Tuesday, and the Dow fell 367 points.

Some of the sharpest drops came from smaller- and mid-sized banks. They've been under heavy scrutiny as the banking system shows cracks under the weight of much higher interest rates.