The blue-chip Dow Jones industrial average logged its biggest one-day point loss yesterday as investors rushed to sell shares in companies worst hit by the terrorist attacks last week.
A surprise US Federal Reserve rate cut of 0.5 of a percentage point before the opening bell did not stop the slide on the first day of trading since hijacked aircraft smashed into the twin towers of the Trade Center on September 11th.
An anticipated patriotic rally failed to materialise, as apprehension rose over possible US military action and a further lurch to recession in an economy already weakening before last Tuesday's devastating blow to the financial district.
The Dow Jones industrial average plunged 678.52 points to 8,921.18 - down 7.07 per cent; and the technology-laden Nasdaq was down 116.09 to 1,579.28 - down 6.85 per cent.
The Dow has now fallen more than 20 per cent from its all-time high in mid-January 2000, placing the index of 30 leading US companies in bear territory. The Dow, Nasdaq and Standard & Poor's 500 Index all were at their lowest since mid-October 1998.
The sell-off was most dramatic in industrial sectors which anticipate huge losses because of the public's loss of faith in air travel.
These included airlines - some of which saw almost half their share values wiped out - hotels and travel companies. Insurance companies were badly hit, and financial conglomerates such as American Express saw share value fall on fears of a slump in consumer confidence.
But although the loss was dramatic, analysts pointed out that it was much less in percentage terms than the one-day fall in the markets on the outbreak of the Gulf War in 1988, and that there was no atmosphere of panic selling.
The loss of business by airlines for four days and an expected big reduction in air travel had a huge impact on profit forecasts in an already troubled sector.
American Airlines and US Airways saw their share value plunge steeply. and Continental Airlines fell $19.44 at $20.20, or more than 49 percent, after laying off 12,000 staffers and warning it could file for bankruptcy without assistance.