Some leading financial analysts are starting to talk openly of a bear market, after a decline of over 500 points in three days. Concerns about the dollar, interest rates and the overvaluation of technology stocks have all started to combine into a rolling wave of doubt about the market's level.
The Dow Jones industrial average fell 205.48 yesterday, or 2 per cent, to close at 10,318.59 taking the blue chip index's fall to 4.5 per cent over the past three days. It is now down more than 1,000 points from its 25 August closing record of 11,326.04, or 8.9 per cent. A 10 per cent fall would mark an official "correction".
Traders fear it could be heading rapidly back towards 10,000, the much- celebrated threshold through which it broke earlier this year. The Nasdaq composite index fell 108.33 to 2,749.83, its fourth-biggest decline ever.
Microsoft's President Steve Ballmer sparked concerns with his comments - widely acknowledged on Wall Street -that technology stocks have risen too high.
"There is such an overvaluation of technology stocks, it is absurd," he told a technology conference. "I could put our own company and others in that category." Asked what Microsoft's stock price should be, he said, "less". The stock promptly fell by $4 to around $92.
The dollar is languishing at its lowest levels against the yen since 1996, and comments from international financial officials have given little indication of any concrete plan to prop it up. Analysts also fear that another rise in interest rates may be on its way from the Federal Reserve next month, following this year's twin increases. The technology sector has also been hit by the problems in Taiwan following the earthquake which killed over 2000 people and damaged the country's semiconductor industry.Reuse content