Panic over European debt contagion sent the U.S. stock market on a wild ride today (Thursday), at one point sending the Dow Jones Industrial Average briefly below 10,000 for the first time since November 2009 before the market turned again.
The Dow was down nearly 1,000 points at 9,869.62 at about 2:40 p.m. EDT when it suddenly rebounded. The Dow ended up closing at 10,517 down 350.97 points or 3.2 % on the day. The Nasdaq Composite Index closed at 2319 down 82.65 points or 3.4%, and the Standard & Poors 500 Index closed at 1127 down 37.85 points or 3.2%.
The trading left the Dow down 6.1% from its yearly high of 11,205, set less than two weeks ago on April 26.
The panic hit as traders worried that European financial markets would seize up.
In Europe yields on Greek, Spanish and Italian bonds surged and the euro slid to a 14-month low on concern that European leaders aren't doing enough to solve the region's debt crisis.
The selling came despite a vote by Greece's parliament to pass the $146 billion (110 billion euro) European Union-International Monetary Fund bailout package.
The fiscal crisis in Europe could threaten banks in Portugal, Spain, Italy, Ireland and the United Kingdom, Moody's Corp. told MSNMoneyCentral.
"Each of these countries' banking systems faces different challenges of different magnitudes," Moody's said. But the "contagion risk could dilute these differences and impose very real, common threats on all of them."
The loss was the Dow's biggest intraday loss since the market crash of 1987, but failed to trigger circuit breakers installed in the wake of the market's crash in October 1997.
Before 2:30 p.m. EDT, a 10% drop would have triggered at least a 30-minute halt in trading the Dow. After 2:30 p.m. a 20% drop in the Dow would have been needed to halt trading. A 10% drop equals 1,050-points in the Dow while 20% equates to 2,150 points, according to The Wall Street Journal.
Traders described Thursday's trading as driven largely by automated sell orders, which piled up after several technical barriers were breached, in particular the 1150 level on the S&P.
"A lot of people thought we had support around that level, so there was some disappointment that it didn't hold," Phil Roth, chief technical analyst at Miller Tabak told The Journal.
News & Related Story Links:
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