The Nasdaq index of hi-tech US shares fell sharply to close at its lowest level for five years after the WorldCom accounting scandal knocked the confidence of traders on Wall Street.

People are nervous about July 4th, the next WorldCom, just pick your poison

Donna Van Vlack Director of trading Brandywine Asset Management

The start to the third quarter of the year was made even more gloomy by the low close of the broader Standard & Poor's index of US companies which closed less than three points above its post-11 September low.

The Nasdaq index closed at its lowest level since June 1997 as traders were gearing up for 4 July amid rising fears of renewed terror attacks.

"People are nervous about July 4th, the next WorldCom, just pick your poison," said Donna Van Vlack, director of trading at Brandywine Asset Management.

Strong economic data and an optimistic profit prediction from the conglomerate 3M failed to lift sentiment sufficiently to shift the clouds that were hanging over the market.

This is partly because there are real concerns about the health of the real economy underlying the weak sentiment governing trading.

"The concerns are that the economic recovery is not as robust as people had hoped for," said CIBC World Markets head of block trading, Dan McMahon.

The Nasdaq index shed 4.06%, the Dow Jones index fell 1.44% while the Standard & Poor's index fell 2.14%.