Stocks dive again; Dow falls 376 points

Growing fear that Europe’s debt crisis could spread around the world

Brendan McDermid / Reuters

Analysts said there was no big event to set off Thursday's selling. More investors seemed to be grasping the possibility that the U.S. recovery could be in jeopardy.

 
updated 10 minutes ago

NEW YORK - Stocks took their deepest plunge in more than a year Thursday as fears grew that Europe's debt crisis could spread around the world and undermine the U.S. economic recovery. The possibility has been brewing for weeks, but analysts said some investors are just waking up to it. 

The Dow Jones industrial average fell 376 points, its biggest point drop since February 2009. All the major indexes were down well over 3 percent and are now showing losses for 2010. Interest rates fell sharply in the Treasury market as investors once again sought the safety of U.S. government debt.

The number of people applying for unemployment benefits last week rose unexpectedly and the Greek government's response to its debt crisis sparked new protests in Athens, but analysts said neither event appeared to set off Thursday's selling. 

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Wall St. reform vote fails again in Senate

By Kevin Drawbaugh and Andy Sullivan

updated 7:21 p.m. CT, Wed., May 19, 2010

WASHINGTON - In a setback for the Obama administration, Senate Democrats failed to muster enough votes on Wednesday to end debate on the biggest overhaul of financial regulation since the 1930s, delaying a vote on passage. 

But analysts still expect the legislation eventually to pass. More debate on amendments was likely, with banks on alert for changes that could threaten their profits. Senate Democratic Leader Harry Reid scheduled another vote for 2:30 p.m. EDT Thursday. 

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Computer Trading Eyed in Wall Street's Mystery Plunge

The Wall Street Journal

Debate over what caused the roller coaster day on Wall Street Thursday turns to rapid-fire computer trading and complex trading systems as mystery chaos is investigated
Traders parsing the mystery of Thursday's stomach-churning stock-market plunge are focusing on whether rapid-fire computer trading, coupled with the market's complex trading systems, triggered a free fall that appears to have begun with an order to sell a single stock.

A big order to sell Procter & Gamble Co. shares came a little after 2:40 p.m., when the stock market was already jittery over turmoil in Greece. Minutes later, the market plunged, ultimately declining nearly 1000 points before rebounding rapidly.

The sell order was sent to the New York Stock Exchange, where it caused a log-jam in trading. Suddenly, P&G shares, among the market's most stable, fell about 35%.

It's not clear precisely how the P&G trade affected other securities. But the tumbling blue-chip stock helped drag down the Dow Jones index. Traders believe the big drop in P&G was picked up by computer models, which set off a chain reaction of selling in other stocks.

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