After a strong start, US stocks tumbled on Tuesday as worries about the credit market resurfaced. American Home Mortgage Investment stocks for example, tumbled 90 per cent.

Positive earnings and economic news was also tempered by a jump in US crude oil futures after the September contract ended above $78 a barrel in New York--its highest settlement ever.

In economic news, a Commerce Department report showed a key inflation reading came in lower than expected. Personal income rose 0.4 per cent in June, while consumer spending rose 0.1 per cent. And the core PCE deflator was up a lower-than-expected 0.1 per cent in the month, the same increase seen in May.

Meanwhile, a report from the Conference Board found consumer confidence rebounded in July, reaching the highest level in nearly six years. The Consumer Confidence Index now stands at 112.6, up from 105.3 in June