"I think some professional money managers are scared out of their minds right now," said Michael Metz, chief strategist at Wall Street investment firm Oppenheimer & Co.
Richard Kersley, at BZW in London, said: "The degree of nervousness around is reflected in how sharply the market fell today. The last few days have been very volatile."
In a dizzying roller-coaster, the Dow Jones index tumbled 90 points in the first 15 minutes of trading yesterday. By mid-morning it had recovered slightly but was later 116 points down, before ending at 6402.52, down 70.7points. Treasury bonds fell more than a point, taking the long-term interest rate well above the psychologically important 6.5 barrier.
The New York Stock Exchange's limits on automatic trading were triggered for the fourth time in five days. Last Friday saw a steep fall after Alan Greenspan, Federal Reserve chairman, criticised the market's "irrational exuberance".
In London the FTSE 100 index ended more than 53 points lower at 3,982.5. Shares in London have tended to react more negatively than Wall Street to recent upsets.
One of the several apparently unfounded rumours that triggered the fall when the US market opened was a report that Abby Joseph Cohen, co-chairman of the investment committee at Goldman Sachs, had turned negative on the market. She has been one of the more notable optimists, arguing that better inflation and growth prospects warranted further increases in share prices.
A separate tremour was caused by a report in the Wall Street Journal that another Goldman Sachs executive, Robert Hormats, was predicting that purchases of shares by Japanese investment institutions would dry up. Foreign purchases have been propping up the US Treasury bond market in recent months, and the Japanese have been particularly heavy buyers due to their government's two-year campaign to reduce the value of the yen.
That report sent bond prices sharply lower and prompted a fall in the dollar against the yen. It ended one yen lower in European trading at 112.9, and continued to slide in New York.
Mark Brown, a strategist at brokers Hoare Govett, said: "When you see markets react in such an extreme way to small pieces of information, they are very vulnerable."
News of a surge in energy prices, giving a higher-than-expected increase in prices at the factory gate last month, contributed to the turmoil. That the "core" measure, excluding energy and food, barely increased did little to soothe traders.
"This was a relatively favourable report," commented Michael Niemera of the New York branch of the Bank of Tokyo. Mr Niemera is among the majority of New York analysts who remain confident that the Fed will resist the temptation to raise US interest rates in the near future in spite of Mr Greenspan's concerns about a bubble in the markets.