Washington  - Major US stock indices dropped sharply Tuesday amid increasing signs of a deepening recession, even as a massive, unprecedented government economic stimulus measure was signed into law.

US President Barack Obama spent Tuesday in Denver, Colorado, to ink the 787-billion-dollar package of federal spending and tax breaks, passed last week by Congress in hopes of spurring economic growth.

But the US Federal Reserve issued a regional report showing that manufacturing in New York had contracted sharply in the previous month.

"There's a growing sense that no matter who's in office, no matter how much they spend and on what, it's going to be a long, painful process to get out of this situation and restore the economy to normalcy," Michael Shinnick, manager of the Wasatch 1st Source Long- Short Fund, told the Bloomberg financial news agency.

The blue-chip Dow Jones Industrial Average lost 297.81 points, or 3.79 per cent, to 7,552.6. The broader Standard & Poor's 500 Index fell 37.67 points, or 4.56 per cent, to 789.17. The technology-heavy Nasdaq Composite Index slid 63.7 points, or 4.15 per cent, to 1,470.66.

The US currency rallied against the euro to 79.498 euro cents from 77.75 euro cents on Friday. The dollar rose against the Japanese currency to 92.385 yen from 91.93 yen on Friday. (dpa)