Wall Street's frayed nerves were further tested yesterday as investors faced the reality of the damage done to corporate America and the US economy by last week's catastrophic events.
In a see-saw day during which investors got what one trader called a "rude awakening" to the fall-out from the attacks on New York and Washington, the Dow Jones plunged by more than 400 points to levels not seen in over three years. But after a dramatic late reversal, coinciding with news that the US was sending planes to the Middle East, it was down just 144.27, on 8,759.13, at the close.
It was the third straight day of declines since reopening on Monday after a four-day shutdown because of the attacks.
The tech-heavy Nasdaq, in a display of even greater volatility, hit new lows for the year and dipped below 1,500 as money managers moved out of tech stocks. But the late recovery saw it closing down27.44, on 1,527.64.
It was a day of unprecedented confusion, stocks were hit by profit warnings, doubts over the situation in Pakistan and Afghanistan and a warning from financier George Soros in Hong Hong about the deepening certainty of a global recession.
The Federal Reserve added to the gloom with a depressing snapshot of the US economy on the eve of the attack. In a "beige book" report it said the economy remained sluggish and slowed further as manufacturing activity weakened in nearly all regions.
Major losers included Kodak, Disney, United Technologies, Honeywell and Intel.
"I think the market right now is seized by fear rather than rationality," said Stanley Nabi of Credit Suisse Asset Management. "Rationality dictates this is the time to step in and buy."
Despite committments from investor Warren Buffett and Saudi billionaire Prince Alwaleed bin Talal earlier in the week that they would not sell any of their shares, investors have rushed to get out of declining stocks. Almost 50 big firms have warned business would be hurt directly or indirectly by the attacks.
Brendan McGrath, Markets Editor, writes: The renewed weakness on Wall Street and fears over the scale of the military reaction to the US bombings resulted in heavy losses for European stock markets.
The Irish stock market was one of the worst-hit and fell 4 per cent with more than €3 billion wiped off its the value. The heavy fall in the ISEQ Overall Index was exacerbated by heavy losses at pharmaceutical giant Elan which accounts for a quarter of the index.
The London market fell 2.6 per cent with oil and banking stocks suffering on fears of recession and lower oil prices.
