Oil prices and bond yields fell, dragged lower by worries that major economies are headed toward a recession. Brent-crude futures, the benchmark in international energy markets, fell 4.9% to $102.26 a barrel a barrel.

In the bond market, the yield on 10-year Treasurys slipped to 2.906% from 2.990% Monday. Yields, which move inversely to prices, have drifted lower since late June on expectations that an economic slowdown would prod the Federal Reserve to pull interest rates back down in 2023.

For now, though, the Fed is intent on pushing rates up in an attempt to tame decades-high inflation. Investors say that campaign, coupled with signs that the U.S. economy is losing momentum, could spell more pain for markets after a rough first half of the year. Adding to the challenges for money managers are China’s struggle to contain Covid-19 and the war in Ukraine.

“There is going to be a recession, but we’re not there yet,” said Philip Saunders, co-head of multiasset growth at

Ninety One,

an asset manager based in the U.K. and South Africa. “The key thing that is going on is that financial liquidity is retracting.”

Meanwhile, data from the National Federation of Independent Business showed confidence among small-business owners fell to its lowest level in almost a decade in June.

Among individual stocks,

PepsiCo

rose 0.1% after the drinks company said second-quarter profits and revenue beat analysts’ forecasts.

Earnings season among major U.S. companies will pick up speed later in the week with results due from major financial institutions. Investors will pay particular attention to comments by bank executives on the trajectory of the economy, and to the effects of higher input costs on profit margins.

Elsewhere in commodities, copper forwards on the London Metal Exchange fell 2.6% to just over $7,400 a metric ton. The industrial metal, a barometer for the world economy because of its use in construction and heavy industry, has slumped by over a fifth over the past month and is more than 30% below the all-time high of over $10,000 a metric ton recorded in March.

One factor that has weighed on commodities in recent weeks has been a stronger dollar. The greenback’s rally stalled Tuesday, pushing the WSJ Dollar Index down 0.1%. On Monday it rose 1.1%, lifting the dollar to its highest level against a basket of other currencies since 2002.

International stocks retreated. The Stoxx Europe 600 lost 0.1%. China’s Shanghai Composite Index lost 1%, Hong Kong’s Hang Seng fell 1.3% and Japan’s Nikkei 225 dropped 1.8%.

-Gunjan Banerji contributed to this article.

Write to Joe Wallace at joe.wallace@wsj.com.