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More trouble seen in Tuesday market

Like a bad hangover, the market is likely to cause investors more pain the morning after.

Like a bad hangover, the market is likely to cause investors more pain the morning after.

Investors are hoping for relief tomorrow, the day after Dow Jones Industrial Average plummeted nearly 513 points to close at 7539.07, close to where the index stood at the start of the year. But analysts say that's unlikely.

"There was so much downside pressure in the last couple of hours [of trading today] that it's hard to believe it won't continue in the morning," said John Rohal, research director with BancAmerica Robertson Stephens.

Meanwhile, companies looking to go public have also been feeling the pain, as the markets have created an unfavorable environment for start-ups to roll out their initial public offering. Underwriters such as Robert Keller, head of Hambrecht & Quist's Internet banking group, have previously said companies that don't have a market lead will an even more difficult time in a down market, whereas in bull times they may be able to pull off an IPO.

How long will this downturn last, stifling investors or companies looking to float out an IPO?

"What to worry about is if retail clients are lowering their exposure to stocks, this could have a negative effect on the markets for awhile," Rohal said.

Retail, or mom-and-pop investors, have been increasingly dumping money into stock mutual funds over the past several years. But these retail investors may be opting to pull their money out stock funds in search of other investments for their money, such as treasuries.

"In the past, the retail client has hung in there and used these lows as a time to buy," Rohal said. "But now, do these people see this as a time to run to the hills and preserve most of their capital?"

But Charles Salmans, a spokesman for online brokerage Quick & Reilly, said some traders were reporting that investors were selling a portion of their portfolio to reinvest in stocks that were hitting new lows and perceived as better bargains.