US stocks plunged on Tuesday as markets gave a thumbs down to a plan unveiled by President Barack Obama's administration to stabilise the financial system.

The Dow Jones Industrial Average slid 381.99 points or 4.62% to 7,888.88 at the close.

The tech-heavy Nasdaq points was down 66.83 points (4.20%) to 1,524.73 and the broad Standard & Poor's 500 index fell

42.73 points (4.91%) to 827.16.

Investors were concerned the financial stabilisation plan unveiled by US Treasury Secretary Timothy Geithner might prove inadequate, some experts said.

The plan included an initial fund of $US500 billion ($734.54 billion) to absorb toxic assets clogging the financial system.