Other financial indicators also showed that investors were nervous. The U.S. dollar suffered one of its largest one-day drops in years, while the price of oil and gold was sharply higher.
The Dow Jones industrial average fell 372.75 points, or 3.27 percent, to close at 11,016, nearly wiping out all of Friday's gains. The Nasdaq composite index fell 94.92, or 4.2 percent, to close at 2,179. The Standard and Poor's 500-stock index was down 47.99, or 3.8 percent, to close at 1,207. The price of crude oil leaped to $120.92 a barrel on the New York Mercantile Exchange, a $16.37 increase. Earlier in the day, the price was up by $25.55. The euro rose as high as $1.4660 versus the dollar, the highest since Sept. 1, according to Reuters Dealing. In early New York trading, the dollar was down 0.7 percent on the day at 106.71 yen. Sterling also benefited from dollar selling, hitting its highest in more than three weeks at $1.8473.
Reporting late Monday night for The New York Times, David M. Herszenhorn wrote that Congress and the administration were inching closer to a bailout deal that would include help for homeowners facing foreclosure and more oversight:
As heated debate began on Capitol Hill, Congress and the administration remained at odds over the demands of some lawmakers, including limits on the pay of top executives whose firms seek help, and new authority to allow bankruptcy judges to reduce mortgage payments for borrowers facing foreclosure.
Congressional leaders and Treasury officials also said they were close to an agreement over a proposal by some Democrats in which taxpayers could receive an ownership stake, in the form of warrants to buy stock, from firms seeking to sell distressed debt.
Lawmakers want to require an equity stake, while the administration wants flexibility on that matter, a Treasury official said.
Despite the progress, the rancor in Congress ratcheted up the pressure on Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke, the architects of the proposal to let financial institutions, including some foreign firms, pass their most distressed assets to the United States Treasury.
Both are scheduled to testify before the Senate banking committee on Tuesday morning, where they must now sell the bailout plan to dubious lawmakers and to an increasingly angry public. They will also appear before the House Financial Services committee on Wednesday afternoon.