Around 10.20am the benchmark NZSX-50 index was down 76.32 points, or 2.3 percent, to 3243.58.
The pain continued for top stock Telecom, down 9c early to a new 15-1/2-year low of 284. Fletcher Building lost 31c to 705 and Contact Energy was off 20c to 870.
Mainfreight was down 25c to 680, Nuplex lost 14c early to 625, Ryman Healthcare was down 9c to 183, Sky City down 12c to 353, Hellaby Holdings down 21c to 191, and Fisher & Paykel Healthcare slid 11c to 305.
Shares losing 5c early included Infratil, down to 210, Pike River Coal down to 170, Rakon down to 270, Tourism Holdings down to 135 and The Warehouse down to 325.
Among stocks down 4c early were Auckland Airport, down to 196, Guinness Peat Group down to 123, and Tower to 206.
Dual-listed stocks ANZ Banking Group was down 44c to 1990, and Westpac fell 73c to 2740.
US shares had their worst day since markets reopened after the attacks of September 11, 2001.
The day followed one of Wall Street's most agonising weekends ever, which saw investment bank Lehman Brothers file for bankruptcy protection and Merrill Lynch forced to accept a takeover by Bank of America Corp. Concerns were also mounting about insurer AIG.
The benchmark Standard & Poor's 500 index fell 4.7 percent, to 1192.70, tumbling to its lowest close since October 2005.
The Dow Jones industrial average slid 504.48 points, or 4.4 percent, to 10,917.51, while the Nasdaq Composite Index dropped 3.6 percent, to 2179.91.
Yesterday the New Zealand sharemarket fell 1.2 percent, or 41.8 points, as investors watched the US troubles unfold.
In Australian shares fell 1.8 percent and Britain's benchmark share index ended almost 4 percent lower overnight (NZT).
