Renewed fears about the financial sector sent Wall Street indexes tumbling to fresh 12-year lows after a new bailout announced for insurance giant AIG and big troubles for Britain's HSBC.
The Dow Jones Industrial Average skidded 299.64 points (4.24 per cent) to close at 6,763.29 yesterday, its first close below 7,000 points and the weakest since April 1997.
The broad-market Standard & Poor's 500 index sank 34.27 points (4.66 per cent) to 700.82, its lowest close since late 1996.
The Nasdaq fell 54.99 points (3.99 per cent) to 1,322.85, capping a calamitous session for global markets.
Market action came after the US government unveiled a fresh aid plan of 30 billion dollars for AIG to stave off collapse of the ailing insurance company as it revealed massive new losses.
"The market doesn't like it because it shows how immersed the government has become in managing a controlled burn of this zombie organisation that is considered too systemically important to die of natural causes," said Patrick O'Hare at Briefing.Com.
The new plan is the fourth for AIG, which was the world's biggest insurer before being hit with huge losses linked to the collapse of the US real estate market and the economic downturn.