KEY POINTS:
The New Zealand sharemarket dropped heavily today as Wall Street wobbled again today and the top 50 index fell to a low for the year.
The benchmark NZSX-50 index fell for the fourth consecutive session and by noon was down 52 points, or 1.3 per cent, to 4013 -- its lowest level since mid-December last year.
Brokers said investors were in for a rough ride.
UBS broker Campbell Stuart said there was a general tone of uncertainty pervading markets.
"This whole credit fear is not fully understood by everyone, so as a consequence most people are pretty jittery about everything.
"I think we are in for a reasonably ordinary patch. It's going to be volatile."
Mr Stuart said intra day volatility had been extreme and he was cautious about the near-term future for the market.
US stocks skidded on fresh signs that global credit markets were seizing up, while a lower profit forecast from retailer Wal-Mart renewed worries about consumer spending.
Wal-Mart's pessimistic outlook and subsequent news that a US investment firm wants to halt redemptions delivered a one-two punch to already shaky confidence.
In the latest sign of a deteriorating credit environment, Sentinel Management Group, which oversees about US$1.6 billion ($2.22 billion) in assets, told US clients it wants to stop investors from withdrawing their cash to avoid forced liquidation.
The Dow Jones industrial average tumbled 207.61 points, or 1.57 per cent, to 13,028.92 -- its lowest close since April 24.
Brokers said the local market was being hit by locals taking profits and foreigners unwinding their exposure to the New Zealand dollar, which has fallen 10 per cent from its peak a month ago.
Market leader Telecom was down 6c to 423, while No 2 stock Fletcher Building was off 18c to 1180.
Only two stocks were up in the top 50 among a sea of red down arrows on brokers' screens.
Vector was up 1c to 254 after reporting its June year net profit rose 126 per cent to $101.7m, boosted by a $40 million one-off payment from the dropping of a deferred tax liability.
The other stock to rise was Tourism Holdings, up 2c to 238.
Those hit hard included BIL International, 7c to 131, Contact Energy, 13c to 890, Hellaby, 8c to 310, Tower, 9c to 202, Hallenstein Glasson, 15c to 440, and Trustpower, 12c to 813.
Of the minnows, Postie Plus, was up 3c to 73c.
Mr Stuart said the reporting season so far had been alright. But he said the market had been strong for a long time "so it's having a bit of a clean-out".
Worries about the subprime mortgage market in the US had direct implications for how people funded investments here, he said.
"A lot of the market has been driven by private equity and the direct acquisitions that have been made around the market and they funded it through these debt instruments and the ease of that had changed."
He said private equity was here to stay but the price firms were prepared to pay would alter because the appetite and the world had changed.
- NZPA