US stocks started the new year on a dismal note with the tech-heavy Nasdaq market plunging to its lowest close since March 1999 on worries profits will fall as the US economy slows.
Investors sold a wide array of technology stocks and moved to safer investments like bonds after brokerage houses downgraded their investment ratings on high-tech names.
Internet equipment makers bore the brunt of Wall Street's wrath, with Cisco Systems falling 13 per cent and EMC, the world's leading data storage company, sliding over 18 per cent.
"Technology stocks are suffering assassination by valuation," said Prudential Securities analyst Mr Bryan Piskorowski. "Ultimately the underpinnings of a slowing economy are translating into lower prices for high-value tech stocks."
The Nasdaq plunged 178.66 points (7.23 per cent) yesterday to a 22-month closing low of 2,291.86.
It had closed the year 2000 on Friday with the largest decline in its 29-year history.
Yesterday's drop was Nasdaq seventh-largest ever in percentage terms.
The blue-chip Dow Jones slipped 140.70 points, or 1.30 per cent to 10,646.15, after finishing the year on Friday with its worst annual performance since 1981.
Yesterday's selloff followed economic data showing US manufacturing fell to its lowest level in a decade, providing more signs that confirmed the cooling of the US economy.
The National Association of Purchasing Management (NAPM) said its index, a gauge of manufacturing across the US tumbled to 43.7 from 47.7 in November. Economists had forecast the index would fall a little, to 47.0.
"It may be a new year, but there are the same old themes - a slowing economy and concerns about technology stock valuations," said Mr Alan Skrainka, chief market strategist at Edward Jones in New York.
"There are still people that believe there could be a soft landing for the economy but there is little doubt that it's been a hard landing for corporate earnings," he said.
Reuters