It seemed ironic somehow that in the first week of 2000, for so long the dateline of science fiction fantasies, hi-tech stocks should take such a battering - what about that shiny new future? But yesterday the rout continued.

The overnight slough on the technology-laden Nasdaq caused many of the stock market darlings of 1999 on this side of the Atlantic to slide. Computer services group Misys lost more than 6% to 835p, Logica fell almost 7% to £13.95 and Psion dropped 14.5% to finish on 416p.

Among others to take a hit, Freeserve , the internet service provider which set the benchmark for the sector when it floated last year, was 7% lower at 554p and Sage Group 7% off at 659p.

Among the biggest losers were semiconductor maker Arm Holdings off 8.5% at £36.69 and computer services group CMG , down 11% at £38.50.

Some dealers noted there had been little institutional selling in the stocks and the kind of freefall which some had been fearing failed to materialise. Perhaps the army of private investors in the sector needed to pay off some hefty post-Christmas credit card bills.

Much of the nervousness in markets worldwide had been triggered by fear of a tightening of interest rates. The Bank of England monetary policy committee meets next week.

After the record plunge on Tuesday, the FTSE 100 index fell another 130 points yesterday to close on 6535.9.

Stocks with an exposure to Asia also weighed heavily on the FTSE after the previous session's sharp fall in Hong Kong. Cable & Wireless , tipped as a stock of the year by a number of the Sunday newspapers, fell 43p to 994p, Standard Chartered was off 37p at 897p and HSBC 30p lower at 792p.

Some of the money being drained from the hi-tech sector found its way back into defensive stocks. National Power was marked up 21p at 385p and PowerGen was 11p better at 450p.

Food retailers held out with Sainsbury up 5p at 347p and Tesco improving 1.5p to 185p. Drinks group Diageo was 4.5p better at 504p.

The powerhouse performance from Next in the run-up to Christmas had investors hoping for a repeat elsewhere. Discount fashion retailer Matalan was 27p higher at £16.65, department store group Selfridges was up by more than 6% at 285p and Marks & Spencer added 1p to end the session on 311p. Next itself didn't fare so well, dropping 15p to 600p.