The aggressive stance on interest rates by Federal Reserve chairman Alan Greenspan finally hit the New York stock market yesterday, with blue-chip and technology stock falling sharply in early trading. At the close in New York, the Dow Jones index of the 30 leading industrial stocks was down 295.05, to 10,219.52. The drop put the 30-stock index in correction mode, with a loss of more than 10 per cent from its January 14th high of 11,722.98.

Dealers said Mr Greenspan's hawkish comments in his Congressional testimony had offset any positive effect from the latest round of upbeat economic figures. "This is an initial reaction to continued nervousness," said Larry Rice, chief investment officer at Josephthal Lyon & Ross. "And there is probably some concern that these benign numbers can't continue benign. Everyone in the real world sits back and says we are paying more at the [petrol] pump so why aren't these numbers showing up?" he said.

The fall-off in share prices was across the board with paper, bank, oil, utilities and building stocks all lower while technology shares, which had risen sharply on Thursday, gave up all of the gains with Nasdaq heavyweights like Intel and Hewlett-Packard lower.