NEW YORK -- Wall Street shares tumbled Wednesday with investors turning cautious as auto giant General Motors moved towards bankruptcy and the market was gripped by fears about rising US debt.

The blue-chip Dow Jones Industrial Average fell 173.47 points (2.05 percent) to end at 8,300.02, giving back nearly all of Tuesday's gains.

The tech-rich Nasdaq shed 19.35 points (1.11 percent) to 1,731.08 and the broad-market Standard & Poor's 500 index fell 17.27 point (1.90 percent) to close at 893.06.

Traders said investors entered the market Wednesday cautious after General Motors reported that it had failed to win sufficient support from bondholders for a deal to swap debt for equity, making a bankruptcy filing more likely.

GM was widely expected to file for bankruptcy protection ahead of a June 1 deadline imposed by the administration of President Barack Obama, which has provided the automaker with billions of dollars in emergency loans.

The failure to strike a deal with the bondholders suggests a likely bankruptcy filing that some analysts say could be messier and longer than that of Chrysler, which appeared poised to emerge from court supervision as a new entity allied with Italy's Fiat.

While most observers expect the US government to lift up GM from its quagmire, "what’s more likely is that GM will drag the US government down -- into deeper deficits, and a far steeper decline in Treasury bond prices," said Martin Weiss, president of Weiss Research.

Fears also remerged about ballooning US government debt and its impact on borrowing costs amid a prolonged recession, pushing yields for US Treasury bonds higher.

"Concerns that higher Treasury yields could complicate an economic recovery effort drove a flurry of selling pressure," analysts at Briefing.com wrote.

"The higher borrowing costs associated with higher yields undermine the government's efforts to keep (interest) rates down in order to help along an economic recovery," they said.

Bonds lost heavily. The yield on the 10-year US Treasury bond jumped to a six month high of 3.695 percent from 3.493 percent on Tuesday and that on the 30-year bond climbed to a nine-month high of 4.606 percent from 4.446 percent. Bond yields and prices move in opposite directions.

The Obama administration estimates a $1.841-trillion deficit in fiscal 2009, which ends September 30.

Under Obama’s budget plan, the federal debt "is rising -- and will continue to rise -- much faster than gross domestic product, a measure of America’s ability to service it," said Andrew Busch of BMO Capital Markets.

Speculation had swirled last week that the United States may be headed for a credit downgrade after ratings agency Standard & Poor's downgraded its outlook on Britain to "negative" because of soaring public debt.

But another credit rating agency Moody's said Wednesday that it saw no need to lower the United States' triple-A sovereign rating.

"Even with a significant deterioration in the US government's debt position, its rating has a stable outlook and demonstrates the attributes of a AAA sovereign," Moody's Investors Service said.

Among the big stock losers was GM, down 20.14 percent to $1.15, and banking giant JPMorgan Chase, falling 5.15 percent to $34.66.