US stocks gave up early gains to fall deeper into a bear market on Tuesday, while sterling steadied a day after hitting a record low, as investors remained nervous about a potential global recession.

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The pound was little changed at $1.067 after sterling collapsed to $1.0327 on Monday on concern over the funding of recently announced UK tax cuts, which follow huge energy subsidies.

The Bank of England said late on Monday it would not hesitate to change interest rates and was monitoring markets "very closely." BofE Chief Economist Huw Pill added on Tuesday that BofE was likely to deliver a "significant policy response" to last week's announcement but it should wait until its next meeting in November before making its move.

The yield on five-year gilts rose as much as 100 basis points in two trading days, but was down about one percent on Tuesday.

US stocks faltered after a morning bounce. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all declined less than one percent.

The S&P benchmark index fell more than 20 percent from its early January high to a low on June 16, confirming a bear market. The index then rallied into mid-August before petering out.

"We don't see a quick retrenchment or a return to two percent inflation, keeping the Fed in hiking mode. This implies more volatility and a need for caution and balance in equity allocations," Tony DeSpirito, BlackRock's chief investment officer for US Fundamental Equities, wrote in a note released on Tuesday.

Markets see a 70 percent probability of a further 75 basis points move at the next US Federal Reserve meeting in November.

The Fed needs to raise interest rates by at least another percentage point this year, Chicago Fed President Charles Evans said on Tuesday, a more aggressive stance than he has previously embraced that underscores the central bank's resolve to quash excessive inflation.

Other central bank speakers due on Tuesday include Fed Chair Jerome Powell and European Central Bank President Christine Lagarde.

"Central bankers have been walking a tightrope trying to curb inflation while attempting to limit recessionary risks," Bank of America strategists wrote in a note released Tuesday.

"However, their recent tone and 'jumbo' rate hikes have reinforced that the foremost priority is controlling inflation, even at the potential cost of a recession."