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Stocks plunge, Dow has record drop, then recovers on concerns about Greek debt problemsap
Traders work on the floor of the New York Stock Exchange, Thursday, May 6, 2010, in New York. It was a painful flashback to the darkest days of 2008: Stocks plunged and the Dow Jones industrials skidded by hundreds of points as traders succumbed to fears that Greece's debt problems would halt the global economic recovery.(AP Photo/Henny Ray Abrams)
Traders work on the floor of the New York Stock Exchange, Thursday, May 6, 2010, in New York. It was a painful flashback to the darkest days of 2008: Stocks plunged and the Dow Jones industrials skidded by hundreds of points as traders succumbed to fears that Greece's debt problems would halt the global economic recovery.(AP Photo/Henny Ray Abrams)
Tim Paradis, AP Business Writer, On Thursday May 6, 2010, 5:40 pm
NEW YORK (AP) -- The stock market had one of its most turbulent days in history as the Dow Jones industrials dropped almost 1,000 points in less than half an hour on fears that Greece's debt problems could halt the global economic recovery.
The market's plunge came less than 90 minutes before the end of trading. The Dow's drop was its largest loss ever during the course of a trading day, but it recovered to a loss of 347 at the close. All the major indexes lost more than 3 percent.
There were reports that the sudden drop was caused by a trader who mistyped an order to sell a large block of stock. The drop in that stock's price was enough to trigger "sell" orders across the market.
Still, the Dow was already down more than 200 points as traders watched protests in the streets of Athens on TV. Protestors raged against austerity measures passed by the Greek parliament. But traders were not comforted by the fact that Greece seemed to be working towards a resolution of its debt problems. Instead, they focused on the possibility that other European countries would also run into trouble, and that the damage to their economies could spread to the U.S.
The Dow has lost 631 points, or 5.7 percent, in three days amid worries about Greece. That is its largest three-day percentage drop since March 2009, when the stock market was nearing its bottom following the financial crisis.
"The market is now realizing that Greece is going to go through a depression over the next couple of years," said Peter Boockvar, equity strategist at Miller Tabak. "Europe is a major trading partner of ours, and this threatens the entire global growth story."
The stock market has had periodic bouts of anxiety about the European economies during the past few months. They have intensified over the past week even as Greece appeared to be moving closer to getting a bailout package from some of its neighbors.
Computer trading intensified the losses as programs designed to sell stocks at a specified level kicked in. Traders use those programs to try to limit their losses when the market is falling. And the selling only led to more selling as prices fell.
The selling was furious:
At 2:20 p.m. EDT, the Dow was at 10,460, a loss of 400 points.
It then tumbled 600 points in seven minutes to its low of the day of 9,869, a drop of 9.2 percent.
By 3:09 p.m., the Dow had regained 700 points. It then fluctuated sharply until the close.
"I think the machines just took over. There's not a lot of human interaction," said Charlie Smith, chief investment officer at Fort Pitt Capital Group. "We've known that automated trading can run away from you, and I think that's what we saw happen today."
On the floor of the New York Stock Exchange, stone-faced traders huddled around electronic boards and televisions, silently watching and waiting. Traders' screens were flashing numbers non-stop, with losses shown in solid blocks of red numbers.
Jack Ablin, chief investment officer at Harris Private Bank in Chicago, said the selling brought back memories of the 1987 crash.
"I've been watching the markets since 1982 and, believe me, I froze at the screen in '87," Ablin said. "But today ... caused me to fall out of my chair at one point. It felt like we lost control."
The impact on some stocks was enormous although brief. Stock in the consulting firm Accenture fell to 4 cents after closing at $42.17 on Wednesday. It closed at $41.09, down just over $1.
NYSE spokesman Raymond Pellecchia said the plunge wasn't caused by a problem with the exchange's trading systems. The Nasdaq Stock Market said it was reviewing its trades with other trading networks.
NYSE chief operating officer Larry Leibowitz said all the major stock exchanges were holding a conference call with the Securities and Exchange Commission to discuss what happened. It was not immediately known if there would be a statement issued after the call to explain the day's events.
The Dow fell 998.50 points in its largest point drop ever, eclipsing the 780.87 it lost during the course of trading on Oct. 15, 2008, during the height of the financial crisis. The Dow closed that day down 733.08, the biggest closing loss it has ever suffered.
The Dow recovered two-thirds of its loss Thursday. It closed down 347.80, or 3.2 percent, at 10,520. That was its biggest point loss since February 2009.
The Standard & Poor's 500 index, the index most closely watched by market pros, fell 37.75, or 3.2 percent, to 1,128.15. The Nasdaq composite index lost 82.65, or 3.4 percent, and closed at 2,319.64.
At the market's lows, all three indexes were showing losses for the year. The Dow now shows a gain of 0.9 percent for 2010, while the S&P is up 1.2 percent and the Nasdaq is up 2.2 percent.
At the close, losses were so widespread that just 173 stocks rose on the NYSE, compared to 3,008 that fell. The major indexes were all down more than 3 percent.
Meanwhile, interest rates on Treasurys soared as traders sought the safety of U.S. government debt. The yield on the benchmark 10-year note, which moves opposite its price, fell to 3.4 percent from late Wednesday's 3.54 percent.
