The Dow suffered its steepest selloff in three months on Tuesday as the markets fretted about a lack of details emerging from trillions of dollars of initiatives unveiled by Washington in an effort to halt one of the worst downturns since the Great Depression.

Once again the markets responded poorly to Washington's unprecedented interventions as stocks plunged even as the Senate signed off on an $838 billion stimulus package and the Treasury Department released plans to significantly expand its efforts to stabilize the financial markets. 

Today’s Markets

The Dow Jones Industrial Average lost 381.99 points, or 4.62%, to 7888.88, the S&P 500 fell 42.73 points, or 4.91%, to 827.16 and the Nasdaq Composite sank 66.83 points, or 4.20%, to 1524.73. The consumer-friendly FOX 50 dropped 32.28 points, or 4.99%, to 614.99.

Wall Street's latest tailspin began Tuesday morning when Treasury Secretary Timothy Geithner outlined in a speech the Obama Administration's financial rescue plan, which includes plans to increase a key Federal Reserve lending facility fivefold to up to $1 trillion. Geithner's speech left out key details, such as how the toxic assets at the center of the credit crisis would be priced. 

“It was more like a pep rally than a tour of facts,” said Frank Davis, director of sales and trading at LEK Securities. “It was very narrow and that was considered bearish. It’s clear the policy was not fully formed yet.”

Wall Street's negative reaction should come as no surprise as the markets deteriorated further or traded sideways following each of the last eight government announcements aimed at addressing new crises, according to Dan Greenhaus, equity analyst at Miller Tabak.

“Wall Street has always operated under a 'sell the news' mentality. This [financial rescue speech] was probably one of the most widely-anticipated 'sell the news' events over the past several years," said Michael James, senior equity trader at Wedbush Morgan Securities. "There was nothing said that you didn’t read in the newspapers over the weekend. There were no surprises."

The Dow posted its steepest one-day plunge of the year and the most since losing 680 points on Dec. 1. In fact, the selloff wiped out three days of gains that had been built on hopes the stimulus and rescue efforts would stop the nation's economic turmoil. The benchmark index, which is already off by 10% in 2009, closed solidly below the psychologically-important 9000 threshold and at the lowest level since Nov. 20. 

All 30 components of the Dow fell by at least 2%, led by financial giants Bank of America (BAC), Citigroup (C) and American Express (AXP). Names like Microsoft (MSFT) and Proctor & Gamble (PG) saw more modest selling but still ended solidly in the red. 

There was broad-based selling on Tuesday but the financial sector suffered the most, plunging 10%. Names like Morgan Stanley (MS), Huntington Bancshares (HBAN) and Fifth Third Bancorp (FITB) fell even further.

All Eyes on Washington 

As has been the case for the past several days, Wall Street's attention was squarely on Washington as policy makers continue to release plans to prevent financial and economic "catastrophe." 

The Obama Administration’s four-part rescue plan includes: new capital injections with tougher conditions for banks that pass a comprehensive stress test; a public-private partnership that could be leveraged up to $1 trillion to clean up banks’ toxic assets; expanding an existing Federal Reserve facility from $200 billion to up to $1 trillion to boost consumer and business lending; at least $50 billion for a foreclosure mitigation program.

"Right now critical parts of our financial system are damaged," said Geithner. "Instead of catalyzing recovery, the financial system is working against recovery and that's the dangerous dynamic we need to change."

Market participants complained that the Geithner speech was short on specifics, especially on how the public-private “bad bank” will work and how it will price mortgage-related assets stuck on banks' balance sheets.

“I don’t think [the selloff] speaks to disappointment about its eventual success but it speaks to the question of how we are going to price these assets and the time needed to make it effective,” said Art Hogan, market strategist at Jefferies & Co.

The rescue unveiling came hours before the Senate passed an $838 billion economic stimulus package that President Barack Obama has spent the past two days campaigning for. It's not clear when the massive spending and tax cut package could reach the president's desk as Congressional leaders must now reconcile competing bills passed by the House and the Senate. 

Meanwhile, Federal Reserve Chairman Ben Bernanke said in testimony in front of the House Financial Services Committee that he is encouraged by the credit market’s response to a series of unprecedented lending programs. He acknowledged that continued concerns about capital levels and credit risks limit the willingness of banks to lend and also vowed greater transparency in the central bank's interventions where possible.

On the energy front, crude oil futures gave back a solid rally, ending the day in the red for the third straight day. The price of a barrel of crude fell $2.01 to settle at $37.55. Gold futures enjoyed their largest one-day gains since Jan. 20,  jumping $21.30 per troy ounce to end at $913.70.

Corporate Movers

UBS (UBS) posted the largest annual loss in Swiss history, capped off by a worse-than-expected $6.92 billion fourth-quarter loss. While the bank saw net inflows in January it still said it plans to slash 2,000 investment banking jobs worldwide.

General Motors (GM) said it plans to lower its salaried positions by 10,000 to 63,000 in 2009 and announced a temporary pay cut for the majority of its U.S. salaried workers, including a 10% reduction for execs.

Dow Chemical’s (DOW) disputed $15.3 billion takeover of rival Rohm & Haas (ROH) received new life on Tuesday after the Financial Times reported the Kuwait Investment Authority may consider boosting its support for the deal if the terms are reconsidered.

Live Nation (LYV) released plans to buy Ticketmaster (TKTM) in an all-stock deal worth $2.5 billion including debt. However, the combined company, which would be called Live Nation Entertainment, faces significant anti-trust hurdles.

Intel (INTC) announced plans to spend $7 billion to upgrade manufacturing technology at its U.S. factories over the next two years, the most the chip giant has invested to upgrade production.

Hartford Financial (HIG) fell sharply a day after Fitch Ratings and Standard & Poor’s slashed the insurer’s credit ratings, citing exposure to the equity and real-estate markets.

Qwest Communications (Q) beat the Street with a fourth-quarter adjusted-profit of 12 cents per share on in-line revenue of $3.3 billion.

Monsanto (MOS) reported a weaker-than-expected outlook for fiscal 2009.

Pepsi Bottling (PBG) beat the Street with an adjusted-profit of 30 cents per share in the fourth quarter but Pepsico’s (PEP) largest bottler released a disappointing guidance for 2009.

DirectTV’s (DTV) fourth-quarter profit of 32 cents per share missed estimates by a penny. The satellite television company’s revenue rose 9% to $5.31 billion, matching expectations. 

Data Dump

The Commerce Department said U.S. wholesale inventories plunged by a steeper-than-expected 1.4% in December. 

Global Markets

European markets plunged on Tuesday, ending a five-day losing streak. The Dow Jones Euro Stoxx 50, which tracks the 50 largest companies in Europe, sank 3.44% to 2268.15 and London's FTSE 100 fell 2.19% to 4213.08.

Asian markets ended mixed overnight as Japan's Nikkei 225 fell 0.29% to 7945.94 while Hong Kong's Hang Seng gained 0.81% to 13880.64.