Stocks on Wall Street plunge in early trading, following the lead of the sliding European and Asian markets.
U.S. markets apparently followed the lead of the sliding European and Asian markets, reacting to the U.S. bombing of alleged terrorist sites in Afghanistan and Sudan and a growing widespread fear of terrorist retaliations.
The continued downturn in the global markets has been prolonged by additional jitters over the state of the Russian and Asian economies, and analysts see no relief in sight.
The Dow lost nearly 1 percent today, as the technology-heavy Nasdaq took an even bigger percentage drop--as much as 3 percent--before rallying to close down 1.9 percent. The Nasdaq lost 34.82 points to 1,797.63.
All the major European stock markets closed down, including Frankfurt's DAX index, which fell 5.92 percent to 5,163.51. London's Financial Times-Stock Exchange closed down 190.4 points at 5,477.
U.S. technology stocks took a beating today, with semiconductor companies receiving the brunt of the decline. National Semiconductor, which reported weak earnings recently, continued to fall and closed down 2.7 percent at11.25. Analog Devices closed the day down 3.8 percent at 19, and Intel was down nearly 1.16 percent at 85.
Autodesk, which yesterday announced its plan to acquire Discreet Logic for $520 million, plunged as much as 20 percent today before recovering slightly. The digital video effects and editing software tools maker Autodesk wants to acquire also fell nearly 20 percent. Autodesk was down 15.9 percent at 27.44, while Discreet Logic fell 18.75 percent at 13.
Leading Internet stocks also tumbled, with Web portal Excite taking the biggest hit, falling more than 7 percent to 40.4, down 3.13. Infoseek and Yahoo fell 2.9 percent and 2.18 percent, respectively. America Online closed 1.77 percent lower at 111.
"The one thing markets don't like is uncertainty, and they have seen a lot of that recently" said said Peter Coolidge, senior equity trader at Brean Murray. "Some of [the uncertainty] is new, some of it has been hanging around."
Coolidge cited several factors as contributing to the nervous gloom hanging over global markets, including Russia's political and economic crisis; the U.S. attacks on alleged terrorist outposts in Afghanistan and Sudan and a subsequent fear of retaliation; and the bankruptcy of Japanese trading company Okura, which illustrates clearly that the Asian economic crisis is far from over.
Coolidge said that, compared to these larger issues, President Bill Clinton's sex scandal is a mere distraction to the markets.
"It is not any one of these things that is taking the market down, it is all of them combined," he added.
Like many analysts, Coolidge does not see a turnaround in the near future. "You are going to see the market continuing to be volatile until things become more defined internationally and politically," he said. "That doesn't mean we won't see a sharp upswing for a day or two."
The downturn that has plagued the market this summer seemed to be coming to an end late last week and again early this week, with the Dow rising by as much as 290 points on Monday and Tuesday.
"Some investors were speculating that the market had bottomed out and you saw money move back into equities," Coolidge said. Most of the money that moved into the market earlier this week went mainly into high-cap names, index funds, and other blue chips, rather than the broad market.
"The rally was pretty anemic, and then you saw reality creep back into the picture," Coolidge concluded.
The one bright spot among Internet stocks today was E*Trade, which closed up more than 7 percent at 25.75. The online brokerage joined its competitors in rallying to handle the increase in trading traffic brought on by today's stock market plunge.
In sharp contrast, shares of Peerless Group, a vendor of software and hardware for financial institutions, fell more than 65 percent today after the company was downgraded by two investment banking firms. Adams Harkness lowered Peerless' rating to "market performer" from "attractive" and Prudential Securities lowered its rating on the company to "hold" from "buy." The stock closed at 7.25, down 64.85 percent-or 13.63 points, despite news only a few days ago that Jack Jack Henry & Associates, also a supplier to the financial sector, was moving to acquire Peerless for about $36 million in stock. The fall comes even as the company announced today that it beat Wall Street earnings expectations for its second quarter. The company posted a profit of 14 cents per share, beating the analysts' consensus of 13 cents.