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* Flattening U.S. yield curves hit bank stocks
* Industrials also lead declines on S&P 500; utilities gain
* Brexit uncertainty, Fed official comments also weigh
* Apple falls after supplier Cirrus Logic's weak outlook
* Indexes down: Dow 2.28 pct, S&P 500 2.22 pct, Nasdaq 2.63 pct (Updates with late afternoon trading)
By Lewis Krauskopf
Dec 4 (Reuters) - Wall Street tumbled more than 2 percent on Tuesday, led lower by bank and industrial shares, as the U.S. bond market sent worrisome signs about economic growth and investors worried anew about global trade.
A prominent Federal Reserve official's comments about the path of interest rate hikes added to the uncertainty for investors, as did setbacks for Britain's plans to leave the European Union.
The S&P 500 was on pace for its biggest single-day percentage drop in about six weeks, giving back some gains from Monday and a week earlier, when the benchmark index tallied its largest weekly percentage gain in nearly seven years.
Investors were focused on U.S. Treasury yields, where the benchmark 10-year yield fell to its lowest point since mid-September. The spread between the 10-year yield over its two-year counterpart also shrank to the smallest in over a decade, a closely watched signal because a so-called yield curve "inversion," when the two-year yield more than the 10-year bond, preceded all the recessions of the past 50 years.
"We've had a huge move in the yield curve," said R.J. Grant head of trading at Keefe, Bruyette & Woods in New York. "Investors are worried about growth right now. Today is the perfect storm."
The Dow Jones Industrial Average fell 590.02 points, or 2.28 percent, to 25,236.41, the S&P 500 lost 62.05 points, or 2.22 percent, to 2,728.32 and the Nasdaq Composite dropped 195.46 points, or 2.63 percent, to 7,246.06.
Stocks had rallied on Monday following a truce between U.S. President Donald Trump and Chinese President Xi Jinping on their trade dispute following weekend talks in Argentina, but investor optimism over a resolution faded on Tuesday. Trump himself warned he would revert to tariffs if the two sides could not resolve their differences.
"The sell-off that we have seen throughout the day is really about taking a look at the tariff conversation and realizing that nothing has been resolved and that there is still some work to do and some of the euphoria that we felt yesterday was more on the headline than on the substance," said Delores Rubin, senior equities trader at Deutsche Bank Wealth Management in New York.
Financial shares, which are particularly sensitive to bond market swings, dropped 3.6 percent and were the worst performing major S&P 500 sector.
The trade-sensitive industrial sector fell 3.4 percent, with Boeing and Caterpillar, seen as bellwethers for the trade issue, declining 3.8 percent and 5.4 percent, respectively.
Apple shares dropped 3.6 percent on bearish comments from brokerage HSBC and as supplier Cirrus Logic Inc cut its outlook.
Utilities, typically viewed as a defensive group, was the only one of the 11 major S&P 500 sectors in positive territory.
In comments on Tuesday, New York Fed President John Williams said the U.S. central bank should expect to continue raising interest rates "over the next year or so" even while it pays close attention to possible risks highlighted by financial markets.
The comments came after those from Fed chair Jerome Powell last week, which lifted stocks as they were interpreted as suggesting a less aggressive path of rate hikes.
"Maybe we’re not going to get as dovish a Fed as some think," said Joseph LaVorgna, Chief Economist, Americas at Natixis in New York.
Declining issues outnumbered advancing ones on the NYSE by a 4.03-to-1 ratio; on Nasdaq, a 5.10-to-1 ratio favored decliners.
The S&P 500 posted 40 new 52-week highs and 27 new lows; the Nasdaq Composite recorded 36 new highs and 164 new lows.
Additional reporting by Sinead Carew and Herbert Lash in New York, Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta and Nick Zieminski