The U.S. stock market fell sharply again Monday, leaving economists wondering aloud if the plunge will bring the economy down with it.
The Dow Jones industrial average dived 234.68 points, or 2.9 percent, to 7,784.58 in volatile trading, closing below the 8,000 level for the first time since October 1998.
Markets around the world seemed to fear a slowdown in the world economy, and investors shrugged off President Bush's statement that "there is value in the market" and his reassurance that the economy was in good shape.
"There is a growing disenchantment with equities globally, rather than with U.S. financial assets," said Robert Barbera, the chief economist of Hoenig and Co., as stock prices slid around the world.
Until recently, there had been general agreement that the economy was growing at a moderate pace, and that there was little danger of a new recession. But Monday's market action seemed to indicate growing doubts about that, with some of the worst performances coming from stocks _ like Dow Chemical, Alcoa and United Parcel Service _ whose business heavily relies on the state of the economy.
It was a day of wild swings. At one point Monday, the Dow was down more than 300, but after the president spoke, a rally pushed it up more than 200 points and above Friday's close. Then in the final two hours of trading the market fell sharply to end at 7,784.58, its lowest close since Oct. 8, 1998.
Over the past 10 trading days _ beginning with the day Bush came to Wall Street _ the Dow has fallen nearly 1,500 points or 16 percent.
As measured by the Standard & Poor's index of 500 stocks, which on Monday fell 3.3 percent to 819.85, the past 10 trading days have been the worst since 1987, with a fall of 16.1 percent. That exceeds the declines seen in such previous market selloffs as the aftermath of last September's terrorist attacks and the 1998 Asian crisis.
On Monday, the Nasdaq composite index dropped 36.50, or 2.8 percent, at 1,282.65. It last closed lower on May 1, 1997, when it stood at 1,270.50.
Bush delivered a forceful defense of current stock prices, saying investors now are "buying value, as opposed to, you know, buying into a bubble." And he said congressional approval of the pending corporate responsibility legislation "will help to take some of the uncertainty out of the market."
The president also told reporters that he had "all the confidence in the world" in his Treasury Secretary, Paul O'Neill.
The comments seemed to reflect the depth of the White House concern of political fallout from the widespread criticism of Bush's economic team and the 39 percent fall in the S&P 500 since he took office 18 months ago.
Sunday's announcement by WorldCom of the biggest corporate bankruptcy filing in U.S. history no doubt contributed to Monday's sour mood by reminding investors and traders that the fallout from corporate accounting scandals is far from over.
Just Monday, for example, stock in BellSouth Corp. fell 18 percent after it announced that its second-quarter earnings had fallen 67 percent because so many customers were disconnecting second phone lines and businesses were cutting spending on data transmission. BellSouth is also owed millions of dollars by WorldCom for using its local network to complete long-distance calls. The news dragged down other phone stocks as well.
Investors also hammered the stock of two of Wall Street's leading investment banks, Citigroup Inc. and J.P. Morgan Chase & Co., on the eve of Senate hearings into the firms' role in helping Enron Corp. hide its deteriorating financial condition from investors and rating agencies.
Market analysts Monday were careful not to make any predictions on when the current bear market might reach bottom.
The throw-in-the-towel sentiment voiced by growing numbers of individual investors sounds to many like the kind of "capitulation" that is considered necessary before a new bull market can begin.
But analysts warn that just as market momentum was able to carry the markets upward for months after it was clear to many that stocks were grossly overpriced at the end of the 1990s, the same kind of overshooting can be expected as prices fall.
Most European markets suffered a worse day than the American market, with the leading indexes in Britain, Germany and France all down about 5 percent for the day.
_ Information from the Washington Post and Associated Press was used in this report.