Shortly before 1:30 pm (US east coast time) the Dow Jones industrial average lost 283.98 points, or 3.6 per cent, to 7,581.04 after briefly tumbling more than 300 points. Losers beat gainers 2,416 to 618 as 526 million shares changed hands on the New York Stock Exchange.

The Nasdaq Composite plunged 49.26, or 3 per cent, to 1,575.29 and the S&P 500 index dropped 31.61, or 3 per cent, to 974.59. The Russell 2000 index of small cap stocks fell 8.52, or 2.4 per cent, to 344.17 and the Dow transports index lost 77.40, or 2.9 per cent, to 2,613.80.

Fear that President Clinton could face impeachment proceedings, now that a special prosecutor's report on the president's alleged misdeeds is in the hands of Congress, spooked investors, already rattled by financial crises inRussia and Asia and plummeting markets in Latin America.

A leadership crisis at the world's only remaining superpower, at a time when economies worldwide are battling recessions and currency crises, could send severe shock waves through global financial markets.

While Clinton faces charges of perjury and obstruction of justice for trying to cover up an affair with a former White House intern, Russian president Boris Yeltsin withdrew his nomination of Viktor Chernomyrdin for prime minister and replaced it with that of acting foreign minister Yevgeny Primakov. The ruble tumbled. Reflecting the global economic turmoil's immediate impact on the U.S. economy, the U.S. current account deficit surged 21 percent to a record $56.5 billion in the second quarter as the country's trade gap soared and income from international investments in U.S. securities fell. The bond market rallied as investors sought a safer place to put their money amid the world stock markets' troubles. The benchmark 30-year Treasury bondrose 1-11/32 points in price, lowering the yield to 5.17 percent. The dollar, however, fell sharply against both the German mark and the Japanese yen, hurt by the uncertainty surrounding the Clinton White House's future. Against the mark, the dollar fell to its lowest level in 16 months.