By the close last night, the Dow Jones Industrial Average was off 161.05 points for the day at 5,349.51, down 2.92 per cent. Fuelling the slide was the technology-heavy Nasdaq composite, off by a bruising 43.14 points, or 3.91 per cent, at 1,060.36 as investors braced themselves for further potentially negative earnings results in coming days.
The retreats renewed speculation that Wall Street is not only in the midst of a major correction, but may be heading into bear market territory after months of gains. Yesterday's was the sharpest one-day drop on the Dow Jones for over two years, putting it down a full 7.3 per cent compared with its high reached on 22 May.
More dramatic is the outlook for the Nasdaq which for the past 18 months has been the best performing of the US markets. It is now 15.1 per cent off its high of early June.
Ron Daino of Smith Barney said: "If we reach a 20 per cent level then you have some problems from a historical point of view and the Nasdaq looks like it could reach that sort of level."
David Schulman, chief equity strategist at Salomon Brothers, said: "The market for the first time in many years has very real earnings fears and also still has to adjust to recent interest rate increases. You would normally expect to get a correction with these two factors".
Yesterday's carnage struck all stock sectors but technology stocks were hardest hit of all.