US stocks suffered their worst fall in nearly five months on Tuesday, reflecting fears that the problems in the mortgage market are spreading and investor appetite for complex debt instruments is drying up.

The S&P 500 index lost 30.52 points – 2 per cent – to 1,511.05, its worst one-day drop since losing 50.33 points on February 27. The Dow Jones Industrial Average slid 226.47 – 1.6 per cent – to 13,716.95.