Wall Street began the third quarter on a poor note yesterday, with the Nasdaq Composite Index falling to a five-year low as the multibillion-dollar accounting scandal surrounding phone company WorldCom deepened.

The Nasdaq dropped through the September 21st low it touched after the terrorist attacks and kept falling to close at a level unseen since June 10th, 1997.

Wall Street's accounting woes, along with jitters about political turmoil overseas and worries that the July 4th holiday may bring another attack on the US, prompted investors to shy away.

"People are nervous about July 4th, the next WorldCom ... just pick your poison," said Ms Donna Van Vlack, director of trading at Brandywine Asset Management. "It's darn hairy out there."

A surprisingly strong forecast from 3M did little to underpin confidence as investors stayed on the sidelines in a shortened trading week. Major stock markets will be closed on Thursday for the July 4th holiday and close early on Friday. The technology-led Nasdaq Composite Index was down 59.38 points, or 4.06 per cent, at 1,403.83 - its lowest close since June 10th, 1997, when the index closed at 1,401.60. Last September 21st, it closed at 1,423.19.

The Dow Jones Industrial Average was down 133.33 points, or 1.44 per cent, at 9,109.93. Breadth was negative, with about two stocks falling for every one that gained on Nasdaq and the New York Stock Exchange. About 2.97 billion shares traded on Nasdaq, with trading in WorldCom contributing about half that volume. WorldCom, which says it faces delisting from the Nasdaq on July 5th and received notice it had defaulted on some loans, fell 93 per cent, or 77 cents, to six cents.