More instability in Hong Kong and a certain degree of panic gripped Wall Street Monday, sending the Dow Jones Industrial Average down 453.82 points, or 5.9 percent, to 7261.59 in late afternoon trading.
"Nobody's on their window sills yet, but this has gotten much worse than anyone expected," said Peter Skalla, an analyst at Olde Discount Corp. "The currency fluctuation in Asia is a real problem, especially for technology companies, because as the dollar gets stronger it will be harder for Asian firms to buy American technology."
The NASDAQ composite was down 104.90 points, or 6.4 percent, to 1546.02.
Monday's downturn follows another bad day in Hong Kong. The currency-roiled Hang Seng index fell 5.8 percent overnight, igniting a replay of last week's worldwide market retreat. Stocks in Japan (down 1.9 percent), Korea (3.3 percent), Germany (4.2 percent), France (2.8 percent) and Mexico (8.9 percent) retreated accordingly. Only three of the major 43 global markets (China, Singapore, Malaysia) reported gains on the day.
"If the dollar becomes too strong, companies will have to cut their prices to move their inventories," Skalla said. "Obviously, when you cut the margins, you cut the profits. Right now, investors are saying 'Thanks for the ride, but I get off here.' "
In the aftermath, technology issues were hurt for the third consecutive day.
Intel Corp. shares were down $4 per share to $76. Digital Equipment Corp. was off $3.69 per share to $46.88. IBM slid $3.44 per share to $94.56. Compaq Computer Corp. was down $5.94 per share to $62.81 while Dell Computer Corp. plummeted $8.06 per share to $85.88.
Analysts said Monday's dramatic slide may be followed by a recovery Tuesday as investors look to grab solid stocks at bargain prices. But, they said, a drop of this magnitude will make investors and their brokers much more selective.
"This is the end product of investors and institutional brokers who thought the good times would never end," said Louis Ehrenkrantz, an analyst at Ehrenkrantz King Nussbaum. "The days of buying for buying's sake are over. When you have companies, particularly Internet companies, selling stock at $40 or $50 a share that are losing tens of millions of dollars a quarter, you know there's a problem."
Many investors and brokers hope to ride out the storm through Friday, the last day in a traditionally tough month for markets.
For the Dow, October has been the month of the great stock-market crashes in 1929 and 1987, plus numerous other jolts over the decades, such as the Cuban missile crisis in 1962 and the mini-crash of 1989. Of the 20 largest daily percentage drops in Dow, eight have occurred in October, including the three biggest.
On Oct. 19, 1987, the Dow lost 508 points, or 22 percent of its total valuation.