Profit taking and interest-rate worries hammered Wall Street Tuesday as the Dow Jones industrial average plunged 360 points to 10,997.93 and the Nasdaq composite shed 230 points to close at 3,901.20, its worst single-day performance in history.
In the meantime, the UK's FTSE 100 index slipped more than 100 points for the second straight session on Wednesday, as blue chip stocks continued to suffer from fears US and UK interest rates were heading higher.
"I think it's postponed profit-taking and a delayed reaction of what is happening on the rate front," said Arnold Berman, technology strategist at SoundView Technology Group. "We saw a decoupling between the action in the Nasdaq and the bond market yesterday and today are getting a catch-up move."
Most analysts are now expecting the Federal Reserve Board to boost short-term interest rates by at least one-quarter of a percent in early February.
Also, President Clinton renominated Fed Chairman Alan Greenspan for another term, the latest vote of confidence for perhaps the most important financial figure in the world.
With market heavyweights BT (quote: BT), Marconi and HSBC Holdings all falling as much as 2.9 percent, the UK benchmark index was down 96.9 points or 1.5 percent to 6,569.0 by 0849 GMT. The FTSE 100 index had minutes earlier been down around 101 points, extending its sharp drop on Tuesday when it slid 3.8 percent or 264 points -- its biggest daily nominal points decline ever.
However dealers said the large fund management groups were remaining calm, with some suggesting the FTSE 100 was due a downward correction after being puffed up to record highs in thin volume ahead of the New Year break. "A lot of people are thinking this downward move will do the market the world of good," said the head of pan-European trading at a leading investment bank. "We have just got to hope the interest rate worries do not become too protracted."
The head trader added that dealing volumes were low as many institutional investors were still engaged in new year strategy meetings.
The FTSE 250 index of medium-sized companies dropped 93.2 points or 1.5 percent to 6,338.9 after a resilient performance on Tuesday.
The top ten losers in the mid cap index were all technology or technology-related stocks.
US Internet stocks took a beating Tuesday as Yahoo! fell 32 to 443 and America Online lost 5 3/4 to 77 1/4. Lycos shed 6 55/64 to 78 3/8. Excite@Home lopped off 3 1/8 to 40 3/8 while Amazon.com and eBay dropped 7 7/16 and 13 1/4, respectively.
Parametric Technology plunged 5 1/8 to 20 after the company said its first quarter revenue would slink 12 percent below the Wall Street consensus estimate of $274m (£170m).
New Tel, an Australian telecommunications company, picked up 23 9/32 to 31 1/2 on plans to work with a number of Chinese government-owned enterprises to set up Internet service.
Among widely held PC stocks, Dell Computer lost 4 1/4 to 46 5/8; Compaq Computer slid 2 1/2 to 28 1/2; Gateway plunged 6 5/8 to 62 15/16 and Apple Computer dipped 9 7/16 to 102 1/2.
Technology news and information company CNET trimmed 5/8 to 60 13/16 as it and radio broadcaster AMFM announced they will join forces to create CNET Radio, the country's first all-tech radio format.
AppNet shot up 7 1/4 to 52 1/4 Tuesday after analysts applauded an e-commerce alliance with telecommunications giant MCI WorldCom.
Chip equipment maker Kulicke & Soffa rose 1 3/8 to 42 15/16 after it said that it expects to "substantially exceed" First Call consensus estimates for its first quarter. Semiconductor companies are benefiting from a spike in November sales, according to an industry group.
Intel shed 4 1/16 to 82 15/16. Advanced Micro Devices chopped off 1 3/4 to 29 1/4 and International Business Machines lopped off 3 15/16 to 112 1/16.
Reuters contributed to this report.