US stocks fell on Tuesday on fear that congressional wrangling could delay a proposed $700 billion plan to rescue the financial sector, increasing worries about the struggling US economy. General Electric was the biggest drag on the S&P 500, falling more than 4 percent, after Goldman Sachs cut the company's profit outlook. GE also weighed on the Dow.
Downgrades also hurt the shares of Bank of America, off 2.5 percent, while energy company shares weakened with the price of oil. The main focus, though, was on the government's rescue plan, which involves mopping up bad mortgage debt from bank balance sheets in an effort to get them lending again.
Federal Reserve Chairman Ben Bernanke on Tuesday urged Congress to approve the plan quickly, warning a delay would put the economy at risk, but lawmakers pushed back, saying it still lacked detail. "Everybody's waiting for this plan to be detailed, and the longer it's delayed, the more people speculate that maybe it won't happen. The one thing the market hates is uncertainty," said Edward Craig, head of cash equities trading at Jefferies Group in New York.
The Dow Jones industrial average was down 161.52 points, or 1.47 percent, at 10,854.17. The Standard & Poor's 500 Index was down 18.87 points, or 1.56 percent, at 1,188.22. The Nasdaq Composite Index was down 25.64 points, or 1.18 percent, at 2,153.34.
Bernanke told the Senate Banking Committee that "action by Congress is urgently required to stabilise the situation and avert what could otherwise be very serious consequences for our financial markets and our economy." Earlier, technology shares led the market higher on hopes that the government's rescue plan would loosen up lending and boost spending.
But doubts about the bailout plan took centre stage by late afternoon, and some traders said that even a swift passage of the bill would not lead to the end of the credit crisis or necessarily bolster the slumping US housing market. "The big question is 'Will the banks lend if they get their balance sheets cleaned up?'" said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
A drop in global commodity prices hurt shares of natural resources companies, including aluminium producer Alcoa, down 4.5 percent at $25.59, and Exxon Mobil, off 1.5 pa shares shed 2.5 percent, or 85 cents, to $33.30. General Electric fell 4.6 percent to $24.95 after an analyst at Goldman Sachs cut the profit outlook on the diversified manufacturer. After leading an earlier rally, technology shares turned negative, with iPod maker Apple Inc shedding 3.2 percent to $126.84. Economic bellwether Microsoft ended up just 0.2 percent, or 4 cents, at $25.44.
About 1.15 billion shares changed hands on the New York Stock Exchange, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.00 billion shares traded, also below last year's daily average of 2.17 billion. Declining stocks outnumbered advancing ones on the NYSE by about 2.6 to 1. On the Nasdaq, decliners beat advancers by a ratio of about 2 to 1.