US shares and the dollar, attempting a recovery amid the new rescue terms for Bear Stearns, was dealt a double blow today as American house prices plunged by their steepest in over 20 years and consumer confidence to its worst for five years.

The two shocks follow weekend news from the New York City's budget office that 20,000 jobs will be lost on Wall Street over the next two years and that banking profits will record an 80 per cent drop for 2007, the sharpest decline since 1994.

In housing, 19 of the leading 20 American cities tracked by the S&P/Case-Shiller home-price index reported a 10.7 per cent decline in the price of homes, much worse than expected and the biggest fall in more than 20 years.

Analysts had been expecting US house prices in that period to fall by 10.5 per cent.

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In the top ten larger American cities, the fall was substantially greater — 11.4 per cent in the year to January.

David Blitzer, chairman of the Index Committee at Standard & Poor’s, said: “Unfortunately, it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007.

“Home prices continue to fall, decelerate and reach record lows across the nation. No markets seem to be completely immune from the housing crisis.”

The fall in prices has been a significant factor hitting the US consumer confidence index which fell from 76.4 in February to 64.5 in March, the lowest point since March 2003, before the American-led invasion of Iraq.

Falling job prospects, increasing fears about the global economy and the weakening housing market all spread gloom.

The Dow Jones industrial average, which staged a recovery yesterday after JPMorgan Chase's decision to raise its takeover price for Bear Stearns from $2 to nearly $10 a share, fell back 61.80 points to 12,487.80 and the dollar touched new daily lows against major currencies.

It fared worst today against the yen, but remained stable against the euro and pound.

On Monday, the New York City's Independent Budget Office estimated that Wall Street's profits for 2007 will sink to just $3.2 billion, down from $20.9 billion in 2006.

Banks and stockbrokers, which account for almost 35 per cent of all salaries and wages in New York City, are expected to have to write off $150 billion.

Ronnie Lowenstein, director of the Independent Budget Office.The budget office said: "The economic situation is particularly precarious. If the problems affecting Wall Street and housing worsen, the recession will be deeper and the fiscal pressures on the city will quickly mount."

The budget office estimates 12,600 Wall Street jobs will be cut this year and 7,600 next.

Mr Lowenstein said the projections do not include any impact from the buyout of Bear Stearns.

Wall Street's profits this are expected at $6.6 billion and in 2009 at $12.2 billion.

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