NEW YORK - March 3, 2009 - An economist from the ratings agency Standard and Poor's has likened the current state of the United States sharemarket to conditions in the late 1930s.

Wall Street plunged more than 4 per cent overnight after insurance giant American International Group (AIG) posted a $157 billion loss, the largest quarterly loss in U.S. corporate history.

The Dow Jones Industrial Average tumbled 299 points, or more than 4 per cent, to close at 6,763, while the Nasdaq fell nearly 55 points, or about 4 per cent, to 1,322.

Earlier, London's FT 100 was also hit and ended the trading day 5 per cent lower to be at its lowest level in six years.

The chief investment officer at Standard and Poor's, Sam Stovall, has told ABC Radio's AM that investors are operating in a climate of intense fear.

"We're rivalling the bear market of 1937-38 and we're still a good 30 percentage points away from the worst decline from 1929-33," he said.

"Our belief is that we probably could see the Standard and Poor's bottom between 625 and 675; this is a number developed by our technicians."

Stovall says investors have an attitude of 'sell first and ask questions later' because they are operating in a sea of fear and suspicion.

"The market basically has to feel that they've got their arms around all of this," he said.

"The market does tend to bottom out well before the fundamentals do; about five months ahead of when the recession typically ends; about nine months ahead of an earnings trough or an unemployment peak.

"But really we have to be able to look beyond this six-month valley to say, have we really priced in all the negative news? Have we learned all of the negative news regarding financials? And I don't think most investors feel that that's the case."