US stocks slumped as investors rushed to sell Fannie Mae and Freddie Mac on speculation that a government bail-out could wipe out shareholders while oil prices spiked above $147, pummelling consumer-facing stocks.

Marc Pado, chief market strategist at Cantor Fitzgerald, said: “The mood is pretty close to panic and unfortunately with good reason . . . There is a great deal of uncertainty with regard to the financial system and the market hates uncertainty, so were are getting a very reasonable reaction.”