The United States House of Representatives has rejected a $US700 billion financial rescue plan for the US mortgage market.
After three hours of debate, the House voted 228-205 against the bill.
"No" votes came from both the Democratic and Republican sides of the aisle: 94 were cast by Democrats.
CNBC reports there will not be a second vote on the bill on Monday.
The Senate is set to vote later this week.
Shares on Wall Street plunged within seconds of the announcement, following a steep fall in earlier trading.
The euro and the British pound tumbled against the dollar and crude oil prices dropped nearly 8% to under $US99 a barrel. Gold jumped as much as 2.8%.
The Dow Jones industrial average closed down 668.57 points, or 6%, at 10,474.56. Standard & Poor's 500 Index was down 94.08 points, or 7.76%, at 1,118.93. The Nasdaq Composite Index was down 172.55 points, or 7.9%, at 2,010.79.
The Dow set a fresh session low at 10,407.34 - a fall of more than 700 points -- its biggest intraday point drop ever.
Canada's main stock exchange plunged more than 800 points, or 6.88%.
The Toronto Stock Exchange dropped 833.76 points. The exchange is heavily weighted with oil and commodity stocks.
The panic extended to Brazil, where the Sao Paulo stock market plunged 10% and suspended operations. Mexico's Bolsa tumbled 6.2%.
The FTSEurofirst 300 index of leading European shares ended down 5.23% at 1,047.04 points - its lowest closing level since 24 January, 2005. The index is down around 27% this year,
In London, the FTSE index of leading shares lost 5.3% to 4,818.77 points. In Paris, the CAC 40 tumbled 5.04% to 3,953.48 points and in Frankfurt the DAX shed 4.23% at 5,807.08 points.
The bailout plan was proposed by the Bush administration on 20 September, amid warnings that urgent action was needed to prevent economic disaster.