From correspondents in Washington, United States, 08:30 AM IST

US stocks have tumbled following a jump in interbank borrowing costs and reports of a worsening economy.

Thursday's decline came despite the vote of confidence by the US Senate late Wednesday for a second version of the $700 billion finance rescue plan.

The US House of Representatives is to vote Friday on this version after dealing a stunning defeat to an earlier version Monday and sending the Dow Jones Industrial Average down about seven percent.

The broad-based Standard and amp; Poor's 500 Index slid 46.78, or 4.03 percent, to 1,114.28. The blue chip Dow lost 348.22 points or 3.22 percent, to 10,482.85. The Nasdaq high tech index slipped 92.68 points, or 4.48 percent, to 1,976.72.

The credit crunch has tightened, Bloomberg financial news service reported. The cost of borrowing in dollars in London for three months rose for a fourth day, signalling continuing uncertainty in the all-important interbank lending system that fuels the commercial system.

The London interbank offered rate, or Libor, that banks charge each other for such loans climbed six basis points to 4.21 percent, the highest since Jan 11.

'If banks aren't willing to lend money to a bank, are they going to be willing to lend to an average person? No they're not. We could be at the start of a pretty bad recession,' Frank Ingarra, money manager at Hennessy Advisors in Novato, California, told Bloomberg.

The US government said jobless claims increased to a seven-year high and factory orders slumped more than forecast. General Electric Co shares lost 9.7 percent after selling $12.2 billion in shares at a discount.

Monsanto Co slid 16 percent, its steepest loss since going public in 2000, after Merrill Lynch and amp; Co said slumping demand will hurt farm companies.

'There's a liquidity crisis going on that's putting investors on edge,' Alan Gayle of Ridgeworth Investments in Richmond, Virginia, was quoted as saying. 'Liquidity is like oxygen. Lack of it can cause serious damage in a very short time.'

(Staff Writer, © IANS)