President Clinton has tried to calm jittery financial markets as the New York Stock Exchange recorded its biggest one-day fall since Black Monday in October 1987. Trading had to be halted twice as prices plunged as a result of massive selling.
Industrial and high technology stocks exposed to Asian markets were the heaviest hit.
The White House spokesman, Mr Mike McCurry, said that President Clinton was "confident that the US economic fundamentals are strong". Unemployment and interest rates are remaining low.
Mr McCurry said that the President was following the market closely but would "not speculate" on the massive falls on Wall St.
Trading was suspended twice. The first occurence was when the Dow Jones index of leading industrials plunged 350 points; after trading resumed, the fall continued to over 554 points, triggering a second suspension and ending trading for the day.
The suspensions were the first applications of the so-called "circuit breaker" rules introduced after the crash of Black Monday and aimed at giving investors time to reflect before taking panic action.
The plunge of 554 points was the biggest ever in one day in points but not in percentages. The Black Monday collapse was a 22 per cent fall in the Dow Jones, but yesterday's fall was only seven per cent.
It was ironic that the plunge on Wall St came on a day when President Clinton was able to announce that the US budget deficit has fallen to $22.6 billion, the lowest since the early 1970s. The US administration had begun the year expecting a deficit of $128 billion.
Following the falls in the Hong Kong and other Asian stock exchanges last week, there was considerable apprehension that Wall St would continue to be adversely affected when trading opened yesterday morning. The fears were confirmed as heavy selling began immediately in all the exchanges and the Chicago futures market. Shares in companies exposed to the fluctuations in the Asian markets were especially hard hit.
Treasury Secretary, Robert Rubin, yesterday ruled out a direct US financial aid package for the Asian economies like the bail-out of Mexico in 1994. He said that the US would work with the International Monetary Fund and the World Bank as it already is in the cases of Thailand, the Philippines and Indonesia. He expressed confidence that a solution could be found.
Financial commentators dismissed exaggerated comparisons with Black Monday pointing out that the percentage fall yesterday was only one third of what it had been in 1987. In a short statement after the New York market closed, Mr Rubin appealed for calm. He said that the US was monitoring the situation closely and that the payment and settlement systems and other control mechanisms on Wall St were working effectively.Refusing to answer questions, Mr Rubin said the fundamentals of the US economy remained strong.
