Investors across the world are today waking up to the fear of stock market meltdown as the conviction spreads that securities face a serious threat of a major sell-off. After share prices recovered from the shock of 11 September, they have traded in a relatively narrow band but last week that began to unravel and there is now no broadly agreed floor.

On Wall Street, the Dow Jones ended last week down 336 at 9,589 after a statement by Intel, the computer chip maker, cutting its revenue forecasts. Sentiment was also badly affected by news of an internal investigation into misuse of funds at Tyco, the conglomerate, by its former chief executive, Dennis Kozlowski.

But attention this morning will first focus on London's six and a half hours' trading before New York opens. Here, the FTSE 100's fall below 5,000 is seen by many professional investors as a grave psychological blow which could trigger substantial precautionary sales and thereby cause the predicted plunge.

While there may be a rally, analysts will be watching closely to see how the struggle between bulls and bears develops. Many fund managers have said publicly that they expect share prices to move up in the second half of this year. But Richard Lake, a respected chartists at the stockbroker Brewin Dolphin, said: "A return to 4,750 or possibly 4,500 now seems quite likely."

The gloom will be heightened by the coincidence that this week the market will see the latest changes in the constituents of various FTSE indices. It is being billed as pronouncing the last rites over the collapse in technology shares.

Leading the wake is Marconi, the riches-to-rags telecoms equipment maker, which faces the humiliation of becoming a small-cap stock.

The debt-burdened company is one of a host of New Economy stars to face demotion. Telewest and Psion, former blue-chip stocks, will also move down to the FTSE SmallCap, while Logica and ARM Holdings face ejection from the UK's premier index, the FTSE 100.

But it is Marconi's humbling that will be most complete, after the scandals last year which led to the resignations of the chief executive, Lord Simpson, and the finance director, John Mayo.

Marconi will be joined in the FTSE SmallCap by Telewest Communications, the cable company. Analysts believe Telewest needs a major debt restructuring to see it through to profitability some time around 2006.

Other former technology stars on their way down include Psion, Filtronic and Anite Group who will be dumped from the mid-cap index, in favour of stocks including Brit Insurance and Hiscox, the Lloyd's of London underwriters.

The likely changes to the FTSE 100, too, will reflect the downfall of New Economy stocks.

Two profit warnings in the past three months have sent Logica shares to below 175 in the rankings of the UK biggest plcs, and it looks set to lead a trio of stocks out of the top flight.

The chip designer ARM Holdings and Electrocomponents, a supplier of electronics equipment, are also on course to be ejected.

The make-up of the new FTSE indices will be decided on the basis of market valuations at the close of trading tomorrow. Barring big price swings, there will be three changes to the FTSE 100 and nine to the FTSE 250.

Xstrata, the mining giant floated in March, looks likely to join the FTSE 100 after seeing its shares rise 8 per cent from their 870p issue price.

Johnson Matthey, the speciality chemicals group, will re-enter the blue-chip index after an 18-year absence, and Bunzl, a packaging group, will be back in the top flight for the first time since 1988.

But these are likely to be small consolation for their followers as the market retraces its steps.