KEY POINTS:
The share market plunged 2 per cent today as concerns grew about the US Federal Reserve's ability to contain the credit crisis.
The NZSX-50 index slid 71.4 points to a close of 3429.43, its lowest level since March 2006.
Economists are apprehensive of more credit problems after news on Friday night that major US investment bank Bear Stearns needed emergency funding.
Wall St's three indices fell between 1.6 and 2.2 per cent on Friday, and Bear Stearns was sold yesterday for a bargain price to JP Morgan Chase.
Macquarie Equities investment adviser Arthur Lim said the significance of the Bear Stearns affair had to be acknowledged, but New Zealand was not as highly correlated to Wall St as other countries.
Investors would either sit on the sidelines or get spooked, "and we are certainly seeing that today".
Market watchers were also cautious about a speedy move by the US Federal Reserve to restore confidence today.
It cut the discount rate it charges on direct loans to banks and set up a new programme to provide cash to a wider range of financial firms - tools it has not used since the Great Depression.
"Desperate times need desperate measures," Craig James, chief equities economist with Commsec in Sydney said.
"There may be more bad news out there but investors should take the view that the Fed is not going to sit idly by."
Here top stock Telecom lost 3c to 375, a fresh 15-year low. But brokers said both it and Infratil, down a cent to 215, weathered the storm well because they were utility-type defensive stocks.
Contact slipped 15c to 845, and second-ranked stock Fletcher Building fell 24c to 851, the lowest since September 2006, in the face of a negative building outlook.
Air NZ fell 10c to 130 after announcing a 3 per cent rise in Australasian and Pacific fares to recoup rising oil costs.
Sky City fell 11c to 377, The Warehouse slipped 6c to 599, and Tower shed 13c to 178.
Other moves included Pumpkin Patch down 15c to 150, F&P Healthcare down 3c to 279, Ryman down 12c to 138, Michael Hill off 5c to 90c, F&P Appliances down 12c to 239, and Rakon down 17c to 213.
Mr Lim said Pumpkin Patch, Ryman, Michael Hill and Rakon were among stocks which had come in for attention because they were held by small-cap investment funds.
Unlisted small-cap funds, in particular, were at risk in a downturn because they might have to liquidate portfolios to meet redemption requests, he said.
The few stocks that rose included Auckland Airport, up a cent to 241, Postie Plus up a cent to 61 and Vending Technologies Group, up 0.5c or 25 per cent to 2.5.
Dominion Finance and NZ Finance Holdings were two of the worst performers percentage-wise, both down 10 per cent. Dominion lost 10c to 90c and NZ Finance was off 6c to 49c.
In Australia, financial stocks were hard hit, including ANZ down 148 to 2320, and Westpac, down 135 to 2500. They dragged the Australian sharemarket down 2.8 per cent in late trading and Asian markets were down around 4 per cent.
On Friday, the confidence crisis saw the S&P 500 index fall 2.08 per cent, or 27.34 points, to 1288.14. The Nasdaq Composite Index slipped 51.12 points, or 2.26 per cent, to 2212.49, and the Dow Jones industrial average dropped 194.65 points or 1.6 per cent to end at 11,951.09.
- NZPA
