NEW YORK (MarketWatch) -- Stocks plunged Monday, with the Dow industrials plunging 777 points or their worst point drop on record, as the House of Representatives voted down the government's $700 billion financial bailout package.

"The bill would've decreased uncertainty, at least a little," said Marc Groz, managing member, Topos LLC. "Instead, the failure of the bill has sent uncertainty -- and the VIX [the market's fear gauge] soaring. This is a fear-driven market."

The Dow Jones Industrial Average DJIA, -0.47% finished at 10,365.45, down 777.68 points, or 7%, giving the blue-chip index its worst point loss in its history, topping Sept. 17, 2001, when it plunged 684 points.

All of the Dow's 30 components ended lower, with sharp losses especially seen in the likes of Bank of America BAC, -1.32% and American Express Co. AXP, -1.08% , which both lost more than 17.6%.

Stocks already were sharply lower as the global credit crisis spread, with four bailouts in Europe and the takeover of Wachovia Corp. roiling securities, commodities and currencies markets and forcing major central banks to pump more hundreds of billions of dollars into the financial system.

The meltdown intensified as U.S. lawmakers voted against on a $700 billion financial rescue plan that some were saying would not be enough to prevent a full-scale financial crisis in many major countries. See full story.

The Federal Deposit Insurance Corp. earlier said that Citigroup Inc. C, -2.12% would buy the banking operations of struggling Wachovia WB, -3.74% . Another banking giant, Washington Mutual Inc. WM, -0.55% , recently succumbed to the credit turmoil. See more.

The S&P 500 Index SPX, -0.48% dropped 106.59 points, or 8.8%, to 1,106.42, with energy, financials and materials fronting sector losses that spread across all 10 of the index's industry groups.

The sell off is the largest percentage drop for the S&P 500 since Oct. 26, 1987. It also translates into a $700 billion loss for the day for the S&P, according to Howard Silverblatt, senior index analyst at Standard & Poor's.

The Nasdaq Composite Index COMP, -0.29% plunged 199.61 points, or 9.1%, to 1,983.73, with losses in the tech sector led by Apple Inc. AAPL, -0.75% , off nearly 17.9%, after two brokers cut their ratings on the stock. Read Tech Stocks.

The downturn had shares of Google Inc. GOOG, +0.32% falling to a two-year low below $400 a share.

Volume on the New York Stock Exchange topped 2 billion, with decliners ousting advancers more than 15 to 1. On the Nasdaq, 1.1 billion shares exchanged hands, and decliners ran past advancing stocks more than 6 to 1.

Fed moves

Taking unprecedented steps, the Fed and other major central banks on Monday poured hundreds of billions of dollars of added liquidity into money markets left paralyzed by fears of further bank failures in the United States and Europe. Read The Fed.

The deal, reached during marathon weekend talks, calls for $250 billion up front to be given to the Treasury to buy troubled assets. The bad debt purchases could be made through an auction process or through directly purchases, a Treasury official said in a conference call.

Equity strategists at Credit Suisse say $700 billion represents about 12% of mortgages not backed by Freddie Mac or Fannie Mae -- "probably an appropriate amount to ensure markets become more liquid." But they said it was too small, especially compared with the original Resolution Trust Corp. program that rescued savings-and-loans in the late 1980s.

Shares of Cleveland-based bank National City Corp. NCC, -3.43% fell 63.3% amid fears the company could become the next victim of the credit crisis.

Mortgage giant Freddie Mac FRE, -0.64% , taken over by the government, on Monday said that it had been subpoenaed by federal prosecutors. See details.

In Europe, financial institutions were also ailing, with the governments of Belgium, the Netherlands and Luxembourg launching a $16.4 billion rescue of Fortis, the Belgian-Dutch bank. Read more.

The U.K. government said it is nationalizing Bradford & Bingley after investors and lenders lost confidence in the mortgage lender, with its stock market listing canceled shortly before the markets opened. See full story.

Also, the Icelandic government said it bought a 75% stake in Glitnir HF, the country's third-largest lender, while a consortium of German financial institutions bailed out real-estate firm Hypo Real Estate. Read more.

Early economic data had the Commerce Department reporting flat consumer spending in August, the third month of weak U.S. consumption. Read Economic Report.

Credit markets remained under pressure, with the yield on the 3-month Treasury bill -- viewed as the least risky short-term investment, falling to 0.294% from 0.87% late Friday. The yield on the 10-year Treasury note declined to 3.615%. See Bond Report.

The dollar rallied against the euro and the British pound, while gold gained and oil futures ended with a loss of more than $10 a barrel. Read Currencies.See Metal Stocks. Read Futures Movers.

The FTSE 100 tumbled 5.3% in London and the Nikkei 225 dropped 1.3%. Read London Markets. Read Asia Markets.

Emerging equity markets in Asia, Europe, Latin America and Africa also posted steep losses. See Emerging Markets Report.