New York  - US stocks fell sharply on Wednesday amid fears that more major bank failures could be around the corner, despite the government rescue of struggling insurance giant American International Group Inc (AIG).

The Dow Jones Industrial Average tumbled 449.36 points, or 4.06 per cent, to 10,609.66. The broader Standard & Poor's 500 Index was down 57.20 points, or 4.71 per cent, to 1,156.39.

Shares in financial firms were the worst performers on the day. Goldman Sachs Group Inc and Morgan Stanley, the only remaining independent US investment banks, suffered their worst ever drops.

The US central bank late Tuesday agreed to make a two-year, 85- billion-dollar bridge loan to AIG and will take a controlling stake in the company, which had been threatened with insolvency if it could not raise the needed capital.

But the lifeline left some investors concerned just how many more financial firms could be in a similarly dire position amid an ongoing credit crisis in the United States.

The Dow plunged more than 500 points, or 4.4 per cent, on Monday, and the S&P 500 4.7 per cent in the worst trading day since the September 2001 terrorist attacks. Both recovered about one fourth of their losses on Tuesday. (dpa)