Shares in Sotheby’s plunged by a third yesterday amid fears that turmoil in America’s credit markets has suddenly hit demand for fine art.

At an auction in New York on Wednesday evening, Sotheby’s failed to sell 20 of the 76 lots on offer, including Van Gogh’s Wheat Fields, which was painted just days before the artist’s suicide in 1890. Of the Impressionist and modern art lots it managed to sell, all went under the hammer for well below expectations.

The auction generated total sales of just under $270 million (£128 million), far short of even the low end of Sotheby’s presale estimates of $355 million.

Shares in the auctioneer, which are traded on Wall Street, fell $16.05 to $34.02, one its lowest levels this year.

Wall Street has increasingly become a major buyer of modern art, as investors sought to diversify their portfolios. Hedge funds have also become big acquirers of modern art, after shares hit record highs in recent weeks. However, the art market has been nervous that massive losses incurred by America’s biggest banks relating to the sub-prime mortgage crisis, would spill over and hit demand.

Two Wall Street analysts used the auction to question whether the New York art market is slowing, infected by Wall Street’s credit crisis and the property recession across America. Dana Cohen, an analyst at Bank of America, told clients that the auction suggests that problems within the credit and mortgage markets was spilling over into the broader economy. She downgraded shares in Sotheby’s from a buy to a hold. JMP Securities also downgraded the stock to a hold.

Sotheby’s - the world’s second largest art seller – had promised the owner of the Van Gogh an undisclosed minimum price, and had to buy the painting itself because no bidder offered a price above that minimum.

Richard Feigen, a New York art collector and dealer, told The Times: “What the auction showed is that there is a lowering of the temperature of the art market. We won’t really know the extent of a slowdown until next week’s contemporary art sales.”

The auctioneer sold Gauguin’s Te Poipoi (The Morning) but secured $39.24 million for the painting, short of its low end estimate of $40 million. The work was bought by Joseph Lau, a Hong Kong art collector.

David Norman, the Sotheby’s chairman of Impressionist and modern art, said after Wednesday’s auction: “I’m not ready to read this at all as a correction to the market, which I think, despite tonight, is strong. I see it more as resistance to the aggressive estimates and not so much that the market has turned.”

Mr Norman insisted that the auctioneer had had a rush of interest in the Van Gogh, which had been expected to sell for between $28 million and $35 million, as soon as the sale was over. Sotheby’s failed to return calls yesterday.

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