U.S. President-elect Barack Obama urged the Bush administration to back a second economic stimulus package and aid the ailing auto industry on Tuesday, after fresh reports of economic weakness in China, Japan and Britain reinforced fears of a prolonged recession, Reuters reported.
World stock markets fell and oil prices, which are heavily dependent on global economic growth, tumbled 5.0 percent to a 20-month low around $58.32 a barrel.
Shares of U.S. automaker General Motors fell as much as 15 percent to lows last seen during World War Two before closing down 13 percent for the day.
"Reality is setting in that we are in a recession. It's almost like an endless abyss for the market -- it's sell first, ask questions later," said Ryan Detrick, an analyst at Schaeffer's Investment Research in Cincinnati, Ohio.
Obama urged President George W. Bush to back a second stimulus package and asked him to use existing bailout measures to help an auto industry battered by a rapid drop-off in sales, an aide said.
A spokeswoman for Obama said he raised the issue in his meeting with Bush at the White House on Monday.
The White House said it was open to considering any proposals from Congress to accelerate loans to the U.S. auto industry from funds already appropriated.
U.S. House of Representatives Speaker Nancy Pelosi threw her weight behind an automobile industry rescue plan, saying aid was urgent and that she was confident Congress could act on emergency bailout legislation next week.
In an effort to reverse a wave of home mortgage defaults threatening the U.S. economy, the regulator for Fannie Mae and Freddie Mac, the two largest U.S. mortgage finance companies, unveiled a plan to cut payments for struggling homeowners.
U.S. homeowners who face foreclosure and are spending more than 38 percent of their income on mortgage payments could have monthly payments reduced by Fannie and Freddie, which own or insure roughly half of U.S. home loans. The move could provide relief for hundreds of thousands of borrowers.
In a similar move, Citigroup Inc became the latest major U.S. lender to try to help borrowers stay in their homes, launching a program it said may result in $20 billion of mortgage refinancings.