NEW YORK -- Wall Street's worst fears came to pass Monday, when the government's financial bailout plan failed in Congress and stocks plunged precipitously - hurtling the Dow Jones industrials down nearly 780 points in their largest one-day point drop ever. Credit markets, whose turmoil helped feed the stock market's angst, froze up further amid the growing belief that the country is headed into a spreading credit and economic crisis.

AP

Traders on the floor of the New York Stock Exchange watch a television monitor as the vote on the bailout package is counted, Monday Sept. 29, 2008. Fear swept across the financial markets Monday, sending the Dow Jones industrials down as much as 705 points, after the government's financial bailout package failed the House.

Stunned traders on the floor of the New York Stock Exchange watched on TV screens as the House voted down the plan, and as they saw stock prices tumbling on their monitors.

The Dow told the story of the market's despair. The blue chip index passed by far its previous record for a one-day drop, 684.81, set in the first trading day after the Sept. 11, 2001, terror attacks.

The $700 billion plan's failure means no one knows how the financial sector hobbled by hundreds of billions of dollars in bad mortgage bets will recover. While Wall Street didn't believe that the plan was a panacea, understanding that it would take months for its effects to be felt, most investors and analysts believed it was a start toward setting the economy right after a credit crisis that began more than a year ago and that has spread overseas.

"Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that," said Chris Johnson president of Johnson Research Group. "This isn't a market for the timid."

The plan's defeat came amid more reminders of how troubled the nation's financial system is - before trading began came word that Wachovia Corp., one of the biggest banks to struggle due to rising mortgage losses, was being rescued in a buyout by Citigroup Inc.

According to preliminary calculations, the Dow fell 777.68, or 6.98 percent, to 10,365.45. The decline also surpasses the 721.56-point intraday decline record also set during the first trading day after the terror attacks. Still, in percentage terms, the decline remained well below the more than 20 percent drops seen on Black Monday of October 1987 and the Depression.

Broader stock indicators also tumbled. The Standard & Poor's 500 index declined 106.85, or 8.81 percent, to 1,106.42.

The technology-heavy Nasdaq composite index fell 199.61, or 9.14 percent, to 1,983.73.