(By Salman - iStockAnalyst Writer)
US stocks finished lower on Tuesday as investors still remain skeptical about the effectiveness of Treasury's rescue plan in containing the current credit crisis and turmoil in financial markets. A possible delay of bailout plan also weighed upon the markets.

The Dow Jones Industrial Average shed 161.51 points (-1.5%), to 10,854.17. The Standard & Poor's 500 Index dropped 18.87 points (-1.6%) to 1,188.22. The Nasdaq Composite Index fell 25.64 points (-1.2%) to 2,153.34. Financials once again were the chief laggards.

On Tuesday, Ben Bernanke told the U.S. lawmakers that financial markets remain under "extraordinary" stress and that the Treasury's rescue plan should be passed immediately. In a testimony before the US Congress, Bernanke said "Action by Congress is urgently required to stabilize the situation and avert what could otherwise be very serious consequences for our financial markets and our economy". "If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse," he said. “At this juncture, in light of the fast-moving developments, it is essential to deal with the crisis at hand," he continued. "Development of a comprehensive proposal for reform would require careful and extensive analysis that would be difficult to compress" Bernanke added. The Fed chairman Bernanke defended govt. takeover of Fannie (FNM), Freddie (FRE), AIG (AIG) and said that regulatory overhaul was necessary.

Earlier on Sunday, Treasury Secretary Henry Paulson urged the Congress to quickly approve a $700 billion proposal to buy bad mortgage debt and toxic assets in order to rescue credit market.

However, investors are concerned that the Paulson rescue would inflate the U.S. budget deficit. It is being seen as a costly affair and something that will induce “moral hazard”.

General Electric Co. (GE) plunged 4.6% after Goldman Sachs cut the company's profit outlook.

Bank of America (BAC) dropped 2.5% after Oppenheimer & Co. bank analyst Meredith Whitney cut profit outlook on the second largest U.S. bank.

Washington Mutual Inc. (WM) slipped on reports that Office of Thrift Supervision has asked WaMu to find a buyer and is considering brokering a deal to break it up among several banks. If no outright buyer emerges in the coming days, the regulator could split WaMu’s deposit base and retail branch network and also share its troubled mortgage portfolio, the report said. J.P. Morgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), HSBC Holdings (HBC) and Banco Santander (STD) are understood to be participating in the WaMu action. Also, rating agency Moody's lowered WaMu's preferred stock to the "most speculative" grade of Ca from B2.