Stocks plunged Wednesday in one of the heaviest trading days ever, as investors registered deepening fears about the economy's course and the Federal Reserve's willingness to right it.
The technology-dominated Nasdaq composite index plummeted 178.93 points, or 7.1%, to 2,332.78, its lowest level since March 1999.
The blue-chip Dow Jones industrials fell 265.44 points, or 2.5%, to 10,318.93. Most foreign stock markets also slumped.
Analysts said the Fed's decision Tuesday to hold short-term interest rates steady, while saying it stood ready to cut rates in the future, left many beleaguered investors with no reason to hold battered stocks in the near term.
Amid the mounting number of companies warning about weak profits, and signs throughout the economy that consumer and business spending is slowing sharply, Wall Street increasingly fears that the nation will tumble into recession in 2001.
"This is clearly a slowing economy that needs a catalyst. But the Fed just turns its head the other way," said Todd Salamone, director of research at Schaeffer's Investment Research in Cincinnati.
That sentiment, however, is far from universal. Many analysts believe that although the economy is decelerating, it is so far in no danger of recession--despite the stock market's evident concern.
"This slowdown still looks temporary," said James Annable, director of economics for Bank One in Chicago.
Moreover, many experts say the Fed, under Chairman Alan Greenspan, does not want to foster the notion that it is ever-ready to bail out stock investors who took risks that they now have come to regret.
"The Fed does not want the market to view them as bailing out an orderly decline" in share prices, Annable said.
If Wednesday's market slide was orderly, it was nonetheless another body blow to technology stocks that just nine months ago had been the darlings of Wall Street and Main Street.
Trading on the Nasdaq market reached 2.79 billion shares, the second-heaviest session in history, and such tech leaders as computer networker Cisco Systems, software giant Adobe Systems and online auction site EBay all fell more than 10% for the day, adding to already steep declines.
The Nasdaq index has now fallen 53.8% from its March record high. Market declines of this magnitude have occurred only twice in the modern era: during the Great Depression of the 1930s, and in 1973-'74, which ranked as the worst economic slump since the Depression.
