Wall Street experienced some of its worst losses ever Monday, with technology and Internet stocks leading the way down as even the most optimitic investors bailed out in the face of an international financial crisis.
The Wired Index saw its biggest point drop to date, falling 29.82 to close at 355.02. The Dow Jones Industrial Average tumbled 512.61, or 6.4 percent, to 7539.07, more than erasing its gains for the entire year. The last time the Dow closed below 8000 was in January.
"The word capitulation comes to mind," said Philip Orlando, chief investment officer of Value Line Asset Management.
After a weekend of failed horse-trading, Russia's parliament said "nyet" to Viktor Chernomyrdin becoming prime minister. The vote was another blow to President Boris Yeltsin, who is expected to renominate Chernomyrdin for premier within a week. Under Russia's arcane parliamentary rules, Yeltsin gets three chances to have his man approved for the post before being forced to dissolve the legislature and call new elections.
This means there won't even be a government on hand when President Clinton holds summit talks with Yeltsin on Tuesday. The uncertainty surrounding the meeting has world financial markets spooked, with investors around the globe looking to unload stocks until a sense of political direction starts taking shape.
Elsewhere, the situation in Japan seems to be getting ever worse. The latest casualty of the country's fiscal fiasco is Sakura Bank, one of Japan's leading lenders, which said it requires an emergency infusion of about US$2 billion from heavyweight shareholders like Toyota and trading house Mitsui & Co.
The situation became more perilous in the final minutes of trading. Traders watched helplessly as the Dow's losses crashed first through the 400-point barrier, and then past 500. It was the Dow's second-worst point loss in history.
Tech stocks -- always the first to suffer when investors get jittery -- were among the hardest hit as traders pondered future profits. Dell Computer (DELL) dropped $18.75, or 16 percent, to $100, and Intel (INTC) slumped $5.81 to $71.19. Cisco Systems (CSCO) shed $11.19, or 12 percent, to $83.50, and Microsoft (MSFT) fell $8.50 to $96.75.
Internet shares were especially bruised. America Online (AOL) fell $16.44, or 17 percent, to $80.00. Yahoo (YHOO) declined $14.75, or 18 percent, to $68.31.
"Just about every Internet stock is down substantially," said Rob Martin, an analyst with Friedman, Billings, Ramsey. "I would interpret it as a valuation correction."
The same might be said for telecom shares, which took another hammering as overseas turmoil raised fears about expansion plans. WorldCom (WCOM) slid $4.75 to $42 even as SG Cowen reiterated a "strong buy" rating for the firm. Qwest Communications (QWST) was down $4.94 at $24.88. Satellite telephony provider Globalstar Telecommunications (GSTRF) plunged $3.88, or 23 percent, to $13.31.
On the plus side, PeopleSoft (PSFT) rose $1.06 to $28.31 after linking with rivals Per-Se Technologies and OmniCell Technologies on integrated software packages for healthcare organizations. PeopleSoft is the leading provider of resource planning programs for the healthcare industry.
The Nasdaq plunged 140.53 points, or 8.6 percent, to 1499.15, its biggest drop ever (it began the year at 1570.35). The S&P 500 finished 69.72 lower at 957.53.
Reuters contributed to this report.
