* U.S. Treasury yields dip due to safety buying
* Bank stocks suffer worst day in over 2 months
* JPMorgan flags revenue trading weakness, other
* Indexes down: Dow 1.64 pct, S&P 1.27 pct, Nasdaq 0.63 pct (Adds details, comments)
By Medha Singh
May 29 (Reuters) - U.S. stock markets sank more than 1 percent in value on Tuesday, downbeat guidance on trading from JP Morgan and worries over Italy putting the S&P and Dow Jones Industrial Average on track for their biggest one-day drops in a month.
The political crisis in Rome, and the threat to the euro project it represents, triggered a rush to traditional safe havens like U.S. debt, pulling down U.S. 10-year bond yields and in turn spurring losses for U.S. banks.
JP Morgan corporate and investment bank chief Daniel Pinto drove another round of selling by saying his bank's second-quarter markets revenue would be flat on the year.
If sustained, the 1.7 percent and 1.3 percent falls in the Dow and the S&P, respectively, would be their biggest daily drops since April 24 and the first of more than 1 percent in May.
The market's main measure of short term volatility, the CBOE Volatility index, spiked 3.9 points to 17.13, its highest since May 3.
"We’re going to see a lot more days like this. This is what 2018 is going to be like," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.
"It doesn’t look, smell or feel like 2017 where we had no volatility, zero tension. You had 12 straight months going higher, that’s unheard of."
At 13:48 pm. EDT the Dow Jones Industrial Average was down 406.82 points, or 1.64 percent, at 24,346.27, the S&P 500 was down 34.69 points, or 1.27 percent, at 2,686.64 and the Nasdaq Composite was down 46.84 points, or 0.63 percent, at 7,387.02.
Yield on the benchmark U.S. 10-year Treasury notes yield fell to their lowest level since mid-April at 2.84 percent.
Wall Street has seen a surge in volatility since the start of February, driven by President Trump's trade attacks on China and concerns over North Korea.
Those moves have slowly eased off, however: the Dow fell by more than 1 percent on five days in each of February and March but only three times in April. On Friday, the VIX opened at its lowest since late January, only 13 points compared to a peak of 50 hit on Feb. 6.
Still, Pinto's comments pushed JP Morgan shares 4.6 percent lower, their biggest fall since the February sell-off and other major banks followed, pushing the S&P banking index down xx percent.
Shares of energy companies were also led lower by a 1.9 percent drop in U.S. crude futures on expectations that Saudi Arabia and Russia could pump more crude to compensate for a potential supply shortfall.
Exxon Mobil fell 1 percent, while Chevron was down 1.3 percent. Halliburton slipped 0.9 percent.
"When you look at lower yields and the lower energy, it's taking a real bite out of the energy complex and certainly the financial complex," said Art Hogan, chief market strategist at B. Riley FBR in Boston.
"I don't think anything has changed (in the last hour or so) but when you call into question one of the larger economies in the euro zone, and what that will mean to the stability of the euro zone, its certainly going to manifest itself into a larger punishment than we saw this morning." (Reporting by Medha Singh and additonal reporting by Sinead Carew in New York; Editing by Arun Koyyur)