Stocks fell over 5 percent on three major stocks as the Fed moved closer to direct lending to businesses, which use short term commercial paper to fund many expenses, including payrolls.

Once steady Bank of America fell 24.09 percent Tuesday as financial firms continue to struggle with choked-off credit markets.

The Dow Jones industrial average, up 53 points early, fell 5.11 percent decline, losing 508.39 points to 9,447.11. The Standard and Poor's 500 lost 60.66 points, to 996.23, down 5.74 percent. The Nasdaq composite index fell 5.80 percent to 1,754.88, down 108.08 points.

On the New York Stock Exchange, 386 stocks advanced and 2,814 declined on a volume of 9.52 billion shares traded.

The benchmark 10-year U.S. Treasury bond fell 12/32 to yield 3.503 percent.

The dollar fell. The euro rose to $1.3607, compared to $1.3519 Monday. Against the Japanese yen, the dollar fell to 101.40 yen, up from 101.61 yen.

In Tokyo, the Nikkei average lost 317.19 points to 10,155.90, off 3.03 percent.

In London, the FTSE 100 index gained slightly, up 0.35 percent to 4,605.20, gaining 16.00 points.