The stock market, which rates the performance of 7,000 American companies each workday, also measures a more elusive commodity called confidence.

Last week that confidence was shattered by the worst battering any stock market has ever suffered. It became a day that Wall Street now calls "Black Monday," a day of reckoning when, in 6 1/2 hours, about $500 billion in paper wealth evaporated.

In a contagion of selling -- or what the Germans call "door-shut-panic" -- the nation's investors stampeded to dump their stocks into the plummeting market before the door shut on the opportunity.

It was one of those awful moments such as the 1962 Cuban missile crisis, or the near-disaster at the Three Mile Island nuclear plant in 1979 when Americans realize that a familiar institution has the potential for turning on them and running amok.

The market recovered some of its losses in seesaw trading the rest of the week. But the shock may well have altered considerably the attitudes of investors and the public towards the purchase of stock and the investment in American enterprise.

Until Monday, the feelings Americans had about the economy had been buoyed for five years by the strongest bull market since World War II and the recent strength of other economic indicators.

The spigot was turned on in 1982 when the Federal Reserve under then-chairman Paul A. Volcker helped bring an end to the recession by increasing the flow of cash and credit into the economy, thus making it easier for American individuals and investing institutions to borrow at lower interest rates -- and to play the market.

A series of personal tax cuts added to the flow, encouraging Americans to do exactly what the federal government was doing: Spend freely and often beyond their means. For many, saving became something that was old-fashioned and unnecessary in a day when anything could be bought on credit, even if the bankrolling increasingly was being done by foreign nations.

In this environment, the stock market became a particularly attractive and exciting place for investors with a raw gambling instinct. For those who got into the market at its low point in 1982, the returns were nothing short of breathtaking as they multipled fourfold in some cases.

"Problems come when so many people in a society think the stock market is a way to get rich quick," said Brookings Institution economist Barry Bosworth.

"It's indistinguishable from Las Vegas," said Bosworth. "It was everyone betting on everyone else's betting."

Short-term performance became the standard the market rewarded, forcing many companies to abandon long-range planning and investing. Even small investors became market watchers, hoping for quick, easy returns.

"We have been living in a bit of a dream world that says we can have it all," said Robert Waterman, a management consultant and author of "The Renewal Factor." "We are pretty well off, but we're not doing as fine as we have been behaving."

The market's focus was not on the long shadows being cast by a stubbornly high trade deficit, an unresolvable budget deficit and the nation's slide into the status of the world's premier debtor. The attention was on what could be earned and spent now. The stock market's performance personified the trend best.

Although everyone realized that surely the end had to come and stocks would drift downward, the reasons why it happened when it did are mystifying, and economists and historians will wonder over it for years to come. Americans who got caught in the fallout from the crash will ask why so few acted on the signs of danger ahead.

"The honest thing to be said is that nobody knows why the stock market crashed on Monday," said Benjamin M. Friedman, professor of economics at Harvard University. "Exactly why market sentiment changed ... nobody knows."

Instantly, comparisons to the dark days of the crash in 1929 abounded, but there are marked differences in the environment in which this stock market debacle took place.

Business historian Thomas K. McCraw of the Harvard Business School pointed out that the underpinnings of the economy in 1929 were in some ways stronger than they are today: New industries were taking hold and growing and the government was running a surplus. The depression that followed the crash came because the institutional and regulatory safety net that exists today was not in place to avoid a panic.

"Now we have the institutions, but we do not have a very healthy economy even though we are in an alleged period of sustained growth," said McCraw.

The roots of the market repudiation, experts say, lie primarily in its long climb that pushed stock prices to unrealistically high levels, based on the underlying value of the companies; a myopic focus on short-term performance by professional investment managers, and a false sense of confidence in an economy that has sustained its growth on borrowed money and excessive consumption.

Indeed, the American economy has become increasingly vulnerable to powerful outside forces as the attitudes of investors and governments in Japan, West Germany and other nations have come to play a pivotal role in determining its fate.

Along with the stock market, another barometer of confidence is the relative value of the American dollar compared to currencies in Japan and Europe. In today's global economy, where foreigners are supplying $160 billion in capital to the American economy this year, a decline in the dollar's value erodes the worth of foreign investment here.

A slide in the dollar thus increases the anxiety of foreign investors, potentially prompting them to consider abandoning U.S. financial markets. And it worries American investors who see the dollar's decline as inviting a move toward higher interest rates by the Fed.

The dollar's decline also spells accelerated inflation in the United States, because the foreign goods Americans buy become more expensive.

By mid-October, American investors were increasingly expecting that the dollar's decline -- and the inflation that would follow -- could not be avoided, and they began to demand protection against future inflation through higher interest payments on bonds.

The stage was set for a sudden rise in interest rates on bonds. Historically, stocks are a better investment than bonds in terms of appreciation, but bonds offer safety to investors because of their guaranteed interest payments.

"One of the sources of weakness in the market was that bond yields had been rising since last spring. It has a depressing effect on the {stock} market because bonds are an alternative to stocks. When yields go up, they look like a better investment," said Geoffrey H. Moore, director of the Center for International Business Cycle Research at Columbia University.

The Federal Reserve Board responded just before Labor Day by tightening credit to deal with inflationary expectations. Then, two weeks ago, fears intensified even more when West Germany raised interest rates, a move that threatened to force higher rates here.

The market misread and overreacted to the Fed's moves, creating downward pressure on stocks and a flight to the bond market, said some financial analysts.

"Why stay in the stock market when you can make 10 percent on bonds?" said Bosworth. "The idea then was to get out before stock prices turned down."

What may have played a smaller role in moving the market, some analysts theorized, were the tremors in the Persian Gulf, questions about presidential leadership during an economic crisis, and the potential for a continued deadlock on federal budget and tax issues.

Some of the consequences of last week's mayhem in the markets already is apparent. "It is premature to quantify this shift, although the direction is clear," said Henry Kaufman, managing director of Salomon Brothers Inc. "Growth will be weaker, inflation will be lower and interest rates will decline further."

The furor also may finally prod government policymakers -- or so Wall Street hopes -- to take action on the budget deficit and provide some sense that the United States will lessen its reliance on foreign money and that the dollar will remain stable.

The more successful the president and Congress are in ending their ideological battles, the less pressure there will be on the Fed to walk a tightrope between holding inflation at bay and preventing a recession. Providing more credit and cash raises the risks of inflation. Tightening the supply risks recession.

One action the president already has taken is to appoint a commission to examine the causes of the collapse and the operations of the market. A primary focus will be on the computerized trading maneuvers that fed the market's volatility and seemed at times to be running out of human control.

"If we ever had reason to mistrust the faith we put in computer systems and technology, that certainly was driven home to us," said Waterman. "All of these things were put into place with good reason, but no one had any idea how they would react under real strain."

Though economists already have scaled back their predictions for growth in the economy and many Americans are sure to pause before they make big purchases, there will be those who will bravely wade back into the market -- however risky that proposition may be.

"It's like bobbing for diamonds at the bottom of a Waring blender," said one analyst. "If you get your teeth around the diamond and get out before the little blades cut up your face, you're all set."

The long view is that the market will correct itself as it has in the past, with or without the recession that sometimes has followed in the wake of major downturn.

"This has been like a giant alarm clock going off," said McCraw. "What we have gone through is a period of the most irresponsible public and fiscal policy in the history of the country. No matter what happens to the stock market, we're almost certain to have a lower standard of living to pay for this binge we've been on."