The relentless two-month slide on Wall Street became an avalanche yesterday, with all three major indices suffering a ninth straight losing week. Investors unloaded shares and fled the market in the face of new corporate upheavals and investigations.
Despite assurances during the week on the US economy from President Bush and Federal Reserve chairman Mr Alan Greenspan, the Dow Jones Industrial Index plunged to below its post-September 11th level.
By close of business last night, the Dow had lost 4.76 per cent to finish at 8,019.26, a low not seen since October 1998. It lost 390.23 points and at one stage dipped below 8,000.
The tech-laden Nasdaq ended within striking distance of a five-year low and the Standard & Poor's (S&P) index of top 500 US companies fell 4 per cent, 40 per cent down from its high two years ago.
In Dublin, more than €500 million was wiped off the value of shares but the Irish stock market fared far better than its European counterparts.
In contrast to London, Paris and Frankfurt, which closed between 4 and 5 per cent lower, the ISEQ index ended less than 1 per cent down.
Dealers said the Irish market has consistently outperformed as markets have fallen this year and that yesterday was no exception.
"It held up very well although volumes were very light," one dealer said.
Wall Street's first Black Friday of the new century was sparked off by more bad corporate news, but the market is suffering from a deeper long-term malaise: the rash of fraudulent accounting that has eaten at investor confidence since the Enron collapse in December.
With the market being run on sentiment, analysts said there was no way of predicting when it would hit bottom. Across-the-board selling in the final hour raised fears of a further collapse when trading resumes on Monday, as happened after Black Friday in 1987.
Looming large in investors' minds is the August 14th date when the leaders of the top US corporations have to personally verify their accounts.
Foreign investors were selling out yesterday due to the falling US dollar and a widening federal budget deficit.
The US trade deficit ballooned to a record $37.6 billion in May, from a revised $36.1 billion trade gap reported for April. Economists had predicted it would fall.
The slide got under way yesterday morning on news of a criminal investigation of a Johnson & Johnson factory, along with the probability of imminent bankruptcy of WorldCom and cautious earnings outlooks from Microsoft and Sun Microsystems.
Shares in pharmaceutical firm Johnson & Johnson fell 15 per cent - its biggest loss since the 1987 crash - after the company confirmed the Food and Drug Administration had launched an investigation of a factory making an anaemia drug that has been linked to a spate of serious illnesses in Europe and Canada.
WorldCom said it was facing a cash shortage, meaning that the telecoms company is likely to file for Chapter 11 bankruptcy over the weekend to allow service to continue for its 20 million consumers and thousands of corporations. WorldCom handles up to half of the United States' Internet traffic. Under Chapter 11 of the federal bankruptcy code, a company continues to operate while it works out a plan to pay its debts.
Mr Tony Crescenzi, a US market strategist, said individual investors are selling because they are disgusted with the market's downturn and concerns about corporate governance at major companies.
Meanwhile, figures released in Dublin yesterday showed that the prolonged slump in the markets was hitting consumer confidence here. The latest retail sales figures show that on a three-month basis, the value of sales between March and May was down 2.1 per cent on levels seen between February and April.
Mr Jim Power, chief economist with Friends First, described May retail spending as "subdued", adding that the "dramatic weakness" of international equity markets may be undermining consumer confidence about the domestic economic outlook.
