WASHINGTON (AP) -- The Treasury Secretary Robert Rubin said he had talked to President Clinton, who was on Air Force One on his way to a summit in Russia, after Monday's stock market closed with the Dow Jones industrial average down more than 512 points.
``The fundamentals of the United States economy are strong due in part to the sound policies we've been following,'' Rubin told reporters. ``The prospects for growth, low unemployment, low inflation continue to be strong.''
Rubin said he also had spoken to Federal Reserve Chairman Alan Greenspan and officials around the world.
``The world is currently working its way through a difficult period,'' the treasury secretary said.
Rubin said it was particularly important that Japan, the world's second-largest economy, ``move ahead with actions to put its economy back on track so that it can be a source of strength for the rest of the world.''
In response to questions about what advice he would give to average investors, Rubin, a former Wall Street investment banker, said: ``I never comment on markets and it wouldn't be appropriate for me to do so here.''
But he maintained, ``Our economy remains sound.''
Soothing words, however, only go so far, some analysts noted.
``I think Mr. Rubin is right that maybe things are fine, but there's no assurance that it's going to stay fine,'' said economist Sung Won Sohn of Norwest Corp. in Minneapolis. ``It is a global crisis now and so no one is really in charge.''
Institutional investors unloaded big blocks of stock at virtually any price, pounding both blue-chip and small-company stocks and driving the market down 6.4 percent Monday.
In panic selling that accelerated late in the day, institutional investors of all stripes -- mutual funds, high-risk hedge funds, and Wall Street investment banks -- created a market exodus that heightened fears that a bear market in US stocks may be in the works.
Monday's steep decline of 512 points brought the four-day decline in the Dow Jones industrial average to more than 1,000 points. But Monday was distinguished by the large volume of block trades by billion-dollar institutional investors, market watchers said.
Investors ``were executing (sell) orders indiscriminate of the price,'' said James Weiss, deputy head of equities for State Street Research and Management, a Boston investment company with $52 billion in assets of institutions and wealthy individuals.
``Institutions are banging the blue chips. Whether it's `Get me out' because redemptions are coming or `Get me out' because I'm protecting my performance -- I don't know.''
Only long-term investors of pension funds or university endowments seemed to sit on the sidelines. Their calm in managing mega-billion dollar portfolios may have been the biggest factor in keeping the market in check.
``We're long-term investors,'' said Scott Henderson, executive director of the Massachusetts Pension Reserves Investment Mangement Board. Nearly half of the $24 billion fund is in stocks. ``We're sticking to the plan,'' Henderson said.
But even individual investors who have stoically watched the stock market decline from its July 17 high have become increasingly nervous about their stock mutual funds. When mutual fund investors, en masse, order their portfolio managers to sell their stake in the fund, managers are forced to sell stock in big blocks.
The U.S. stock market has now lost $2.32 trillion since July's peak, according to Wilshire Associates, whose index of all stocks listed on major American exchanges suffered its biggest one-day drop ever on Monday. The Wilshire fell $632.3 billion to $8.786 trillion, surpassing the loss of about $500 billion on Black Monday 1987.
Rubin said payment and settlement systems and other market mechanisms were working effectively, unlike in 1987, when backlogs occurred and many small investors were unable to cash out their holdings when they wanted.
There was a ``slight'' problem on the Chicago Board Options Exchange, Rubin said, but it was resolved and the exchange is expected to open on time Tuesday.
CBOE officials said computer systems had to struggle to handle the trading volume just before the close of trading, resulting in a temporary slowdown in quotes for stock options on the trading floor.
Aboard Air Force One, White House economic adviser Gene Sperling also pushed for the funding that Clinton has requested from Congress for the IMF, which is running low on money because of its attempted bailouts of Russia and Asian countries.
``We've always said that a strong IMF is a stabilizing force,'' Sperling said.
Monday's 512 point drop in the Dow Jones industrial average, to 7,539.07, put it below 8,000 for the first time in seven months and more than wiped out the remnants of all of this year's gains.
It was the second-largest point drop ever, closely trailing the record 524.26 points of Oct. 27, 1997, and just above the 508-point ``Black Monday'' swoon of Oct. 19, 1987, when the market had its biggest percentage fall, a tumble of 22.6 percent.
Monday's loss was 6.4 percent, the biggest daily percentage drop since last October.
In last week's global stock market rout, the Dow plunged 481.97 points, or by 5.6 percent, its biggest percentage drop for a calendar week since 1989.
Doubts about Russia's economic and political stability kept pressure on financial markets around the world, and share prices also fell in Europe, Hong Kong and Singapore. Japan posted a modest gain, however, after dropping to a 12-year low Friday.
``There have been intense discussions over the past few days,'' Rubin said.
The Boston Globe contributed to this story.