Worries about the economy saw the US dollar rise again most currencies, especially the euro and the Aussie which traded around 83.10 US cents, down around a cent in a day.
Gold fell $US11 an ounce to around $US897; oil dropped more than $US2.50 to just over $US106.70 a barrel and copper lost 11 US cents to end at $US3.14 a pound in New York.
Australian market was off more than 1%, according to the overnight futures market and the ASX/200 could start around 70 points down this morning.
In new York BHP Billion and Rio Tinto shares were weak as analysts saidf iron ore exporters would get smaller than expected price rises next year.
Rio's American depositary receipts fell the most since at least 1990, losing 13% to $US289.14 and BHP's ADRs slipped 5.2% to $US61.77.
General Electric was the biggest drag on the S&P 500, falling more than 4%, after Goldman Sachs cut the company's profit outlook. GE's fall also hit the Dow. GE had itself added to the uS anti-shorting list.
Downgrades also hurt Bank of America shares, off 2.5%, while energy company shares fell as the price of oil retreated.
More details were made public with US Congressional hearings starting overnight in Washington, but Wall Street didn't like the debate and delays..
Treasury Secretary, Hank Paulson, President Bush and Fed chairman Ben Bernanke all urged Congress to swiftly approve the plan.
Chairman Bernanke warned that the US economy would contract if the plan was not adopted and adopted quickly.
But there are concerns the Democrats might try to ram through one off pork barrel deals or attempts to control banking salaries, while some Republicans have expressed doubts about the whole idea.
Comments from the head of the Senate banking Committee, Senator Dodd didn't help sentiment.
He said this morning government economic rescue plan was "not acceptable" in its current state.
"A lot of reservations have been expressed this morning by Democrats and Republicans on this matter," said Dodd, a Democrat, speaking after Paulson and Federal Reserve chief Ben Bernanke testified in Congress.
"What they have sent to us this is not acceptable," said Dodd. "This is not going to work."
Wall Street tumbled more than 160 points after hearing that, going from being slightly up, to well down on the day.
European stock-index futures dropped with Dow Jones Euro Stoxx 50 Index futures off 1.9%
National indexes decreased in all 18 western European markets. London's FTSE 100 lost 1.9%.
Asian markets ended the sharp two day rally on those doubts about the Paulson plan.
The MSCI Asia Pacific Index (excluding Japan) fell 1.9% with financial shares the big fallers.
Stocks fell around the region, except in South Korea, Taiwan and Malaysia. Markets in Japan are shut for a holiday.
China's CSI 300 index dropped 3.8%. Hong Kong was off 3.9%.
The Australian share market lost 1.9%, ending the two-session rebound, as doubts grew about whether the $US700 billion ($A840 billion) US financial bailout package would work.
The ASX 200 index ended down 97 points, or 1.9% at 4923.5, after rising 4.5% on Monday.
Australian shares traded lower as regulators announced exemptions to the ban on short selling and detailed proposed legislation to better control it.
At the close the All Ordinaries was down 92.4 points, or 1.8%, to 4957.7.
BHP Billiton fell $1.80, or 4.5%, to $37.90, Rio Tinto dropped $2.76, or 2.5%, to $108.24 and Fortescue Metals shed 64 cents, or 9%, to $6.51.
Banking led the way down with the ANZ losing $1.11 to $18.04, the Commonwealth Bank 38 cents to $44.22, the National Australia Bank 44 cents to $23.86 and Westpac 20 cents to $24.50.
Retailers were mixed, with Harvey Norman adding one cent to $3.51, Woolworths dropping 52 cents to $27.01, Wesfarmers retreating 57 cents to $31.18 and David Jones falling one cent to $4.39 ahead of the release of its full year results later today.
Media was mixed, with Consolidated Media Holdings adding three cents to $2.75, Fairfax falling 13 cents to $2.85, News Corp shedding 71 cents to $15.78 and its non-voting shares losing 70 cents to $15.51.
Telecommunications provider SP Telemedia lost one cent to 14 cents after reporting a full year loss of $18.93 million following debt write-offs, and cut its earnings guidance for the new year.
It's part of the Washington Soul Patts group whose 61% owned subsidiary New Hope Corp losing six cents to $4.40 despite forecasting significant earnings growth this year and delivering a rise in annual profit to $90.68 million
Santos added 17 cents to $18.70; Woodside dropped a cent to $56.99 and Oil Search lost nine cents to $5.53.
The spot price of gold was higher was trading at $US891.30 an ounce by late yesterday, up $US20.15 on yesterday's local close of $US871.15 an ounce.
Gold miners were stronger, with Newcrest adding $1.34 to $26.84, Lihir 12 cents to $2.77 and Newmont 16 cents to $5.15.
Telstra was the most traded stock on the market, with 42.05 million shares changing hands, collectively worth $172 million. Its shares rose 16 cents to $3.98.
And in a report issued this morning, the International Monetary Fund says Australia is well placed to withstand the credit crunch.
In particular, the report notes that IMF "Directors welcomed the support that prudent fiscal policy is providing for monetary policy."
The IMF Executive Board considered that Australia's banking system remains resilient, with stable profits, high capitalisation and few non-performing loans.
This was evident in stress tests undertaken by the IMF and presented in their report, which showed that Australian banks are able to absorb 'extreme' shocks.
The IMF considers that the outlook for the economy is more uncertain than usual due to large countervailing forces impacting on the economy, with the commodity boom providing a substantial stimulus and the global downturn exerting a contractionary effect.
IMF staff forecast that real GDP growth will moderate as required to bring underlying inflation back within the RBA's target range.
On an annual basis the IMF consults with the Australian authorities, private sector economists and academia to provide an independent and comprehensive assessment of Australia's economic performance.
This forms part of its program of economic consultations with all IMF member countries.
