AFP - US stocks plunged Tuesday to November lows as investors fretted over the effectiveness of a new US economic stimulus law and two automakers raced to submit restructuring plans for their survival.
The Dow Jones Industrial Average sank a whopping 297.81 points (3.79 percent) to finish at 7,552.60.
The tech-dominated Nasdaq dropped 63.70 points (4.15 percent) to 1,470.66 and the broad-market Standard & Poor's 500 index retreated 37.67 points (4.56 percent) to 789.17.
The blue-chip Dow index ended within a whisker of its November low, when it closed at 7,552.29.
After Monday's markets holiday, the Dow traded more than three percent lower throughout most of the punishing session.
"Stocks today extended last week's gruesome performance, with the major market indices plummeting right out of the gate this morning," said Elizabeth Harrow, an analyst at Schaeffer's Investment Research.
Al Goldman at Wachovia Securities noted that the losses had followed sharp drops in overseas markets on concern that banks may face rating downgrades and further losses.
"Accusations of 'massive fraud' involving a Houston-based investment firm added to the heaviness," he added.
The US Securities and Exchange Commission Tuesday accused Texas magnate and top cricket promoter Allen Stanford in an international securities fraud scheme involving 9.2 billion dollars.
It was the biggest US financial fraud case since Wall Street financier Bernard Madoff was arrested two months ago on charges he ran a 50-billion-dollar pyramid fraud.
Investors appeared unconvinced about a 787-billion-dollar economic stimulus package signed into law Tuesday by President Barack Obama, who declared the "beginning of the end" of the worst US economic crisis in 80 years.
Analysts said the market does not see any quick relief from the tax cuts and spending bill and has little confidence that it will work.
Frederic Dickson at DA Davidson said the economic stimulus package "hasn’t inspired investors, as many have lingering questions about the timing and its ability to achieve near-term economic stability."
Data on manufacturing activity in the New York region deepened the gloom, showing a fall in the Empire State index to another record low in February.
The lack of investor confidence was reflected in the strengthening dollar, seen as a safe-haven currency in times of market uncertainty.
Investors also awaited Tuesday's government deadline for preliminary restructuring plans from General Motors and Chrysler. The two struggling automakers have received a combined 13.4 billion dollars in Treasury Department loans to help them avoid collapse.
Shares in GM plunged 12.80 percent to 2.18 dollars; Chrysler is not publicly traded. Ford, which has said it does not need government aid, skidded 3.98 percent to 1.69.
Banking shares were hammered. Bank of America tumbled 12.03 percent to 4.90, Citigroup lost 12.32 percent at 3.06 and JPMorgan Chase dived 12.31 percent to 21.65.
Wal-Mart, the only gainer among the Dow's 30 blue chips, rose 3.68 percent to 48.24 after posting a relatively small decline in quarterly profit.
Amid plummeting crude oil prices, Dow heavyweight ExxonMobil dropped 4.44 percent to 71.28 and Chevron fell 5.09 percent to 66.18.
Bonds gained as investors fled the equities rout. The yield on the 10-year US Treasury bond slumped to 2.662 percent from 2.882 percent Friday and that on the 30-year bond fell to 3.486 percent from 3.682 percent. Bond yields and prices move in opposite directions.