Nervy US investors sold shares right and left on Monday, pushing the main indices to record lows as the after-effects of fresh negative economic data and corporate profits hit confidence.

By the close in New York, the Dow Jones industrial average had fallen 1.4% or 113.87 points to 7,872.15.

There is now the threat of a slowdown, because unlike in June or July, the latest decline was widely diffused

Ken Goldstein Conference Board chief economist

Before a last-ditch rally - caused by investors seeking bargains after the day's rout - the Dow had dropped as low 7,788, back at levels last seen in 1998 and less than 100 points above this year's low set in July.

As for the technology sector, the Nasdaq composite index fell even further, losing 3% to 1,184.93 for the worst close since 12 September 1996.

And the broader Standard & Poor's 500 index closed down 1.4% at 833.7.

The performance was a doleful return to form, after last week - despite a modest rise on Friday - produced a near-4% fall overall on the Dow Jones.

The blue-chip index has fallen more than 1,100 points since 22 August, closing below 8,000 last week for the first time in almost three years.

European markets spent the day lower too, as the bad news emanating from the US added to a lack of investor optimism surrounding the narrow election victory for German Chancellor Gerhard Schroeder.

The bad news keeps coming

Fears of a renewed economic slowdown in the US have helped exacerbate the gloom engendered by a possible war on Iraq and rising oil prices.

The Federal Reserve's Open Markets Committee meets on Monday and Tuesday to decide whether fresh interest rate cuts are necessary to boost the economy.

Monday's economic data did little to dispel the stormclouds.

The Conference Board, a private New York-based forecasting group, said its index of leading indicators fell for the third month in a row, losing 0.2% in August - double what analysts had expected.

Three straight months of decline on the Conference Board index is taken by many economists as an early warning of recession.

"There is now the threat of a slowdown, because unlike in June or July, the latest decline was widely diffused - only one of the ten components had a significant positive contribution," said Ken Goldstein, the board's chief economist.

Corporate woes

And if that was not enough to worry investors already jittery about the strength - or otherwise - of the recovery from last year's recession, warnings of trouble in USA Inc added to the negative sentiment.

Telecom equipment maker JDS Uniphase said its upcoming profits would fall short of expectations, while massive retailer Wal-Mart said its sales would be at the bottom end of its predicted range.