American stocks fell, erasing their gains since the Federal Reserve’s September 18 interest-rate cut, after New York expanded its probe of the mortgage industry, General Motors Corp. posted a record loss, and the dollar tumbled. Washington Mutual Inc., the largest American savings and loan, declined the most in 20 years after the attorney general of New York, Andrew Cuomo, said there was a “pattern of collusion” in the bank’s home-loan appraisals. Fannie Mae posted its steepest drop since 2005 and Freddie Mac sank to a seven-year low after Mr. Cuomo subpoenaed the two biggest American providers of mortgage financing. GM slid after writing down $39 billion in tax benefits.

The Standard & Poor’s 500 Index lost 44.65, or 2.9%, to 1,475.62, its biggest drop since August 9 and lowest level since September 12. The Dow Jones Industrial Average retreated 360.92, or 2.6%, to 13,300.02. The Nasdaq Composite Index decreased 76.42, or 2.7%, to 2,748.76. More than 12 stocks fell for every one that gained on the New York Stock Exchange.

“Is there another shoe to drop in financial services? Does the dollar continue its dive? Those are the issues that the market is responding to,” a manager of $2.6 billion at Clover Capital Management, Matthew Kaufler, said.

The collapse of the subprime mortgage market has dragged financial shares down 18% this year, prompted the Fed to cut interest rates and accelerated a sell-off in American currency. The dollar fell to the lowest in 30 years against a basket of six rivals yesterday after Chinese officials said they plan to move some of the nation’s $1.43 trillion of foreign-exchange reserves into stronger currencies.