Illustration: Thomas Fuchs for Newsweek 

When a group of community volunteers rang the bell to signal the close of trading at the New York Stock Exchange last Friday, it brought to a close one of the most tumultuous weeks in global markets since the fall of 2001. On Tuesday, the Dow Jones industrial average, already down 9 percent in 2008 on glum economic news, plummeted nearly 600 points (5 percent) before rallying after the announcement of an emergency three-quarter-point interest-rate cut by the Federal Reserve, the biggest such reduction in 24 years. Wednesday was like Groundhog Day, with the Dow falling more than 3 percent before closing with a gain. "Yesterday was a s--t storm and today really isn't any better," said a glum broker in a green trading jacket outside the New York Stock Exchange. Cari Maher, who works in an office building on Wall Street across from the exchange, noticed a sign of market stress—an unusual number of nervous smokers outside, huddling on the cold sidewalk.

Investors also sought solace in nicotine outside a branch of Zheshang Securities in central Shanghai. Several elderly men, barred from smoking indoors, peered through the doorway at the big screen inside showing stock prices. "It was pretty scary earlier this week," said Zheng Xiaosheng, 68, puffing his cheeks against the cold. The Shanghai Composite index, which has quadrupled in the past two years, fell more than 10 percent in 48 hours—the biggest two-day fall in Shanghai's stock-market history. The same day, stunned Indian investors, angered that Mumbai's benchmark Sensex index had fallen 5 percent for two straight days, staged a protest outside the Bombay Stock Exchange, chanting "Death to [Finance Minister Palaniappan] Chidambaram."

In Davos, Switzerland, the volatility derailed the agenda at the World Economic Forum. Participants were disembarking from the rustic train that chugs into the Alpine ski resort just as all hell was breaking loose back home. Instead of discussing malaria and microfinancing, many big shots spent their time anxiously hunched over computer screens and fingering BlackBerrys like prayer beads. Treasury Secretary Henry Paulson canceled his planned visit and stayed in Washington to help hammer out a stimulus package.

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