The Dow Jones Industrial Average fell by 249.48 points or 3.17 per cent, to 7, 615.54 while the dollar lost ground against the yen and the German mark.

``The Dow is down and I have my helmet and seat-belt on. It's going to be a rough ride,'' said Delos Smith of the Conference Board, a private forecasting group.

``The major factor is what kind of credibility would the President have left and how he could repair it'' when the political turmoil over the sex-and-perjury scandal subsides, Smith said.

On Wednesday, Independent Prosecutor Kenneth Starr sent his 445-page report on the Monica Lewinsky affair to Congress for possible impeachment hearings against Clinton. The report was expected to be released to the public on Friday.

``Most prominent today is the fate ofPresident Clinton and the prospects for a long impeachment process as per (President Richard) Nixon in 1974,'' said Larry Wachtel, a Prudential Securities chief equity strategist.

Smith argued that the markets' problems went beyond Clinton.

``It's part of what's happening in Russia, the Japanese changing interest rate, it's never only one factor,'' he said. ``We went a little bit ahead of ourselves on Tuesday with the euphoria over (Fed chairman Alan) Greenspan and we are backing off.''

A brutal day in Latin America also contributed to Wall Street's woes. Sao Paulo, Latin America's financial capital, twice interrupted trading on Thursday as its main index slid nearly 16 per cent.

Others like the Standard and Poor's 500 shed 26.01 points, or 2.59 per cent. The composite index for the Nasdaq electronic market fell 39.22 points to 1,585.33, or 2.41 per cent.

The dollar followed Wall Street's decline.

``The dollar fell against the German mark and paired yesterday gains against the Japanese currency onspeculations that the Fed (US Federal Reserve) might follow and lower interest rates,'' said Wachtel.

The US bond market, a traditional haven in economic uncertainty, reacted as expected. The average yield on benchmark, 30-year treasury bonds fell to 5.211 per cent against 5.266 per cent on Wednesday.

Since reaching its record high of 9,338 points on July 20, the Dow has lost 18.5 per cent of its value. The drop since the start of the year stands at 3.1 per cent.

On Wall Street on Thursday, some 880 million shares changed hands with 775 advancers, 2,348 decliners and 390 issues unchanged.