Wall Street's roller-coaster ride, triggered by the meltdown in subprime mortgage lending, is spreading pain through financial markets -- but has not hit Main Street yet.
The bankruptcy filing by American Home Mortgage last week and the freezing of some funds at French bank BNP Paribas this week unnerved investors and roiled markets around the world.
Major central banks stepped in to supply liquidity to credit markets that were seizing up, helping to calm investor jitters and stem the fear-driven indiscriminate selling of securities that markets experienced on Thursday and Friday.
As bad as things are -- and they're bad -- people are imagining even worse and are dumping stocks willy-nilly, said Chip Hanlon, president of Delta Global Advisors Inc. in Huntington Beach, California.
Talk about credit and speculation about hedge funds lead traders and investors to a black-box area that nobody understands and it is easy to start imagining the worst, he said.
Investor sentiment is very clearly in the panic zone, Hanlon said.
Global stock markets fell in jittery sessions on Friday. The Dow Jones industrial average was off 0.75 percent at 13,171.18 in afternoon trade, and the FTSEurofirst index fell 2.4 percent, wiping out this year's gains.
World stock markets have shed more than 7 percent since hitting record highs only a month ago.
While the pain was sharp on Wall Street, the little guy was taking the market's ups and downs in stride.
I'm still young, so I just trust that (the market) will rebound, said Dawn Meyer, 35, who works at a law firm in the suburbs of Indianapolis, Indiana. She said her 401(k) retirement account was set to ride out the market gyrations.
It'll be a while before I retire, so it'll be a while before I have to readjust my 401(k), Meyer said as she stood in Times Square with her mother under the awning of the Hard Rock Cafe.
Nearby, Luis Mercado, a 32-year-old New Yorker selling spa treatments to passersby, expressed concern about the market turmoil.
It doesn't affect me directly, but everything affects everything. I'm aware that people are nervous and I would prefer a more optimistic climate, Mercado said.
I'm not Wall Street, I'm Main Street, he said. But I can't say (the market) doesn't affect me. A big change at the top will always trickle down.
Other New Yorkers were also a bit nervous, and others a touch more sanguine about the market's gyrations.
I shake my head in terms of what the market reacts to. It's like a bunch of Nervous Nellies out there, said Richard Taub, 53, who is in the process of buying a home.
I don't see a lot of real rational response. I see little events happen that people have knee-jerk reactions to. And I think it's a reaction rather than a calm, economic analysis.
Joe Hunt, a 60-year-old consultant, said he has watched the housing market with trepidation because he has hopes to move out of New York City.
My wife and I are approaching retirement, Hunt said. I am concerned about our future and our ability to sell our apartment.
For those at an age where they have moved investments to less volatile securities, the recent market rout hasn't reached epic proportions.
Everybody fears the unknown and right now there is a big unknown, said Salvatore Salamone, 67. The question is how far will the fear spread.
There are three stages that people undergo when speaking of market volatility, said Richard Curtin, director of the Reuters/University of Michigan Surveys of Consumers.
The stages are awareness that markets change, uncertainty about where markets are headed and taking a market's move seriously, Curtin said. Consumers are concerned that housing has been in a slump, but job and wage growth has offset those concerns, he said.
It's not a clear picture for consumers, but it is on balance more favorable than unfavorable, he said.
Brett Steenbarger, who has a doctorate in clinical psychology and coaches traders, said the recent increase in market volatility is new to many people working in the financial markets -- which has increased their stress levels.
Traffic to Steenbarger's Web site is up 40 percent since market volatility picked up in late July, and e-mail traffic has doubled, he said. Because job security is tenuous in the financial markets, market swings can boost stress, he said.
Very successful traders lose their touch when the markets change and they can't find that success again, Steenbarger said, adding that traders can live a fast life.
Traders as a whole don't differ from the population at large, he said. Among certain groups of traders I've worked with there's a higher incidence of drug and alcohol abuse. The very short-term traders who carry a lot of risk and are in and out of the market, they tend to burn the candle at both ends.
(Additional reporting by Kristina Cooke, Helen Chernikoff and Edith Honan)