Kiwi tech stocks have taken a hammering as investors react to global fears about the risk of another bubble in the sector and a weakening world economy.
By the close yesterday the S&P NZX50 Index was down by 82.5 points, or 1.3 per cent, at 6071.3 after weakness in mining, banking and technology shares helped drive the US market to 22-month lows.
The local market finished last year at a record high of 6324.26.
The contagion spread to Japan, with most other Asian markets closed for Chinese New Year holidays.
"I think we're in an environment right now of shoot first, ask questions later," Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, told Reuters. "That's the mentality of technology investors right now."
Overnight Wall Street slid anew with the price of oil moving lower. West Texas Intermediate for March delivery dropped more than 3 per cent to US$28.77 a barrel on the New York Mercantile Exchange.
In 13.09pm trading in New York, the Dow Jones Industrial Average slid 0.7 perc ent, while the Nasdaq Composite Index retreated 1.1 per cent. In 12.54pm trading, the Standard & Poor's 500 Index fell 0.5 percent.
Facebook shares closed down 4.2 per cent in New York yesterday, while shares in professional networking site LinkedIn recovered after slumping 43.6 per cent on Friday - wiping US$11 billion ($1.6 billion) off the firm's market value - following a disappointing revenue forecast.
Some NZ technology-based stocks were playing catch-up, after Monday's holiday.
Among them were cloud-based accounting firm Xero, which dropped by 7 per cent to close at $15.10 last night, and information technology company Orion Health, which fell 5 per cent to $2.85, which was a record closing low.
Crime-fighting software developer Wynyard Group dropped 6.7 per cent to $1.40.
Attention is turning to the local reporting season, which is generally expected to show solid performance, but analysts said individual stocks could expect to be punished if their earnings come in below expectations.
Added to the growing list of issues to affect investor confidence were concerns about the creditworthiness of some international banks. The Australian share market, which put on a steady performance on Monday, started to peel off yesterday, the All Ords index falling 139.5 points, or 2.78 per cent, to 4882.6, with selling centering on the banking stocks.
We are not calling for people to hit the panic button - certainly not in this part of the world - but this kind of volatility on world markets could persist for the next few months until there is some clarity.
Renewed investor anxiety came on top of extreme volatility on world oil markets , a lack of clarity as to what the US Federal Reserve's next move might be, and lingering concerns about China's slowing economy.
Mark Lister, head of private wealth research at Craigs IP, said: "Now people are starting to wonder whether all these issues - and China and the other emerging markets - could act to drag down the US economy ... into recession.
"We are not calling for people to hit the panic button - certainly not in this part of the world - but this kind of volatility on world markets could persist for the next few months until there is some clarity," he said.
In the US, investors fled to the perceived safety of US Treasuries, pushing yields on the 10-year note eight basis points lower to 1.76 per cent.
The turmoil has boosted interest in US Federal Reserve chairwoman Janet Yellen's semi-annual testimony to Congress this week.
As the price of oil dropped again - West Texas Intermediate crude last traded at US$30.21 a barrel while Brent was at US$33.49 - so did shares of energy companies.
In Europe, the Stoxx 600 Index fell 3.5 per cent, the UK's FTSE 100 Index sank 2.7 per cent, France's CAC 40 Index fell 3.2 per cent and Germany's DAX Index slid 3.3 per cent.