The Dow Jones industrial average dropped 81.87 points, or 0.9 percent, to 8,611.41.
The barometer's interest-sensitive components were hit the hardest. American Express shed 3 7/8 to 97 1/8, J.P. Morgan dropped 3 5/8 to 122 7/8, and Travelers Group slipped 2 to 56 1/4.
"Our message is unchanged from two weeks ago, and we believe it may be time to lighten up during rallies,"Ralph Acampora, head of research at Prudential Securities, said in a research note. "One sector that does look good is the computer sector.
"Our conclusion is that we've yet to see the end of this decline. We're looking for a meaningful bottom in late September or early October."
Trading, which had been choppy all day, became increasingly volatile after news broke of a U.S. military strike against terrorist targets in Afghanistan and Sudan.
At 1:55 p.m. EDT, President Clinton appeared on national television and announced the morning attacks, which included an assault on a Sudan chemical weapons facility.
He said there was convincing evidence that the terrorists were responsible for the recent embassy bombings in Kenya and Tanzania, and said the terrorists were planning further attacks against U.S. interests.
After word of Clinton's planned announcement hit newswires at 1:36 p.m. EDT, the Dow dropped 45 points in the next six minutes before recouping as much in the following 15 minutes.
But sellers emerged just after 2:00 p.m. EDT to force prices lower for the rest of the day.
The technology sector traded lower, amid broad selling of semiconductor issues. Chip shares fell for the second day on a Merrill Lynch downgrade of Intel and a warning about lower profits from National Semiconductor. On Wednesday, cautionary words from Analog Devices and LSI Logic torpedoed the group.
Talk of potential bank failures in Japan and Russia accentuated the bearish mood on Wall Street, as did speculation that Venezuela might devalue its currency by as much as 20 percent to 25 percent. Reports of a run on Venezuelan banks also made the rounds of trading rooms.
The worry is that more currency devaluations, such as Russia's, will spread around the globe, making it more difficult for American-made goods and services to be competitive. Such a development would crimp U.S. exports, a contributor of U.S. economic growth.
In Russia, the benchmark RTS index fell 4.0 percent. Central bank First Deputy Chairman Sergei Aleksashenko said it was likely that some of Russia's largest commercial banks will go out of business but later said the comment was merely his opinion. At the same time, Russia's central bank said it will guarantee the bank deposits of individuals.
In Thursday's market highlights:
- The Standard & Poor's 500 Index fell 0.6 percent.
- New York Stok Exchange losers bested winners by 19 to 11.
- On the Big Board floor, turnover slowed 2 percent to 622 million shares.
- The Nasdaq Composite declined 0.6 percent. Declining issues led gainers by 13 to 7 in the Nasdaq Stock Market. Volume totaled 645 million shares.
- The Russell 2000 Index of small-capitalization stocks sank 1.0 percent.
- The 30-year Treasury advanced 20/32, to yield 5.518 percent.