NEW YORK (CNNMoney.com) -- In one of the most gut-wrenching hours in Wall Street history, the Dow plunged almost 1,000 points Thursday before recovering to close down 348, as erroneous trading in Procter & Gamble and several other stocks sparked a massive selloff.
Fears about the spread of the European debt crisis dragged on stocks through the early afternoon. But the selling picked up in intensity and the Dow reached its nadir at around 2:40 p.m. ET.
The selling was a result of technical glitches that caused some stocks, including Dow component Procter & Gamble (PG, Fortune 500), to plunge 37% to $39.37 per share from the close of $62.12 Wednesday. The consumer products maker recovered most of that loss by the close, ending just 2% lower.
But the faulty P&G trading was responsible for 172 of the 998.50 points that the Dow Jones industrial average (INDU) lost at its worst, the biggest one-day point decline on an intraday basis in Dow Jones history.
Accenture, 3M, Sotheby's and other stocks may have been impacted by similar problems. (For details,click here)
At the closing bell, the Dow was down 348 points, or 3.2%, to end at 10,520.32. The Dow's biggest one-day point decline on a closing basis was Sept. 29, 2008, when it fell 777.68, which had also been the previous intraday mark.
"On the Dow, we were down 400 to 800 points in five minutes, it was horrifying," said Art Hogan, chief market strategist at Jefferies & Co.
Beyond the erroneous trades, the selling pressure of the last few days has been more technical than fundamental, said Hogan. He said the market collapsed some major technical support levels, and could be in for more selling Friday.
However, there are a few factors that could help stabilize the market Friday, said Peter Cardillo, chief market economist at Avalon Partners, including news on Greece.
"The key is to get Germany's vote tomorrow in favor of the Greek aid package from the European Union," he said. "If that happens, that could help calm fears and stabilize the market."
Friday's big April jobs report could end up being a non-event, said Donald Selkin, chief market strategist at National Securities. "We've had good economic reports all week and it hasn't happened."
The CBOE Volatility (VIX) index, Wall Street's so-called fear gauge, closed at 34.16, its highest finish since May 4, 2009. Earlier, it had spiked as high as 40.71, a 62% jump and its biggest one-day surge since February 2007.
Selkin said that often when the VIX gets over 40 that can be a sign that the selling has been overdone, which could be good. But with the fear gauge closing below that level, it may not provide a boost Friday.
"International markets are obviously going to get hit over night and futures are pointing to a weak open in the U.S.," Selkin said.
Gold spiked above $1,200, the euro plunged to a more than 1-year low against the dollar and oil prices fell. Treasury prices rallied, sending the corresponding yields lower as investors sought safety in government debt prices.
The run from the euro and into the dollar and U.S. government debt was a classic flight to quality, said Ted Weisberg, NYSE floor trader, Seaport Securities. He said that the continued weakness of the euro was going to be a big drag on the markets as it pummels dollar-traded commodities and also hurts companies that do a lot of business overseas.
After the close, both the Securities and Exhange Commission and the Commodity Futures Trading Commission said that they would be looking into the unusual trading that took place Thursday.
Movers: All 30 Dow components slid, with oil components Chevron and Exxon Mobil, financial leader JPMorgan Chase, and tech names Hewlett-Packard and IBM among the big losers. 3M, Boeing and United Technologies added to the weakness.
Market breadth was positive. On the New York Stock Exchange, winners beat losers 17 to 1 on volume of 2.58 billion shares. On the Nasdaq, advancers topped decliners seven to one on volume of 4.48 billion shares.
European debt problems accelerate: Stocks have been sliding on and off for the last two weeks as investors mull the ramifications of the growing debt crisis in Europe.
While European leaders have pledged to provide Greece with $146 billion in loans over the next three years, attempts by the nation to institute certain "austerity" measures to bring down the deficit have sparked riots and other violent outbursts.
Meanwhile, investors are concerned that the size of the bailout will make Europe less able to help Spain, Portugal and other debt-plagued nations. The so-called PIIGS also include Italy and Ireland.
"There's no question that Europe and Greece, and specifically the fear of contagion, is what's driving the market lower," said Hank Smith, chief investment officer at Haverford Investments.
"Having said that, we also have to be cognizant that the market was due for a pullback at a minimum, and possibly a correction," he said.
He noted the market hasn't had a correction - technically defined as a selloff of 10% on a closing basis - for at least 14 months.
A slew of good - but not great - retail sales reports from the nation's chain stores, and a report that showed weekly jobless claims dropped were also in focus.
Economy: The number of Americans filing new claims for unemployment fell to 444,000 last week from a revised 451,000 the previous week. Economists surveyed by Briefing.com thought claims would fall to 440,000.
Continuing claims, a measure of Americans who have been receiving benefits for a week or more, dropped to 4,594,000 from a revised 4,653,000 in the previous week. Economists expected 4,600,000 continuing claims.
The report was released one day ahead of the government's closely watched April jobs report, due Friday morning. That report is expected to show employers added 187,000 jobs to their payrolls after adding 162,000 in March, according to economists surveyed by Briefing.com.
The growth is considered a step in the right direction, but the number of new jobs is not yet enough to keep up with the number of new entrants in the labor market.
The unemployment rate, generated by a separate survey, is expected to hold steady at 9.7%.
Corporate news: Troubled mortgage lender Freddie Mac (FRE, Fortune 500) reported an $8 billion quarterly loss Wednesday and also said it needs another $10.6 billion from the federal government. The company was put into conservatorship by the government during the height of the financial crisis in 2008, along with its sister company Fannie Mae (FNM, Fortune 500).
World markets: In overseas trading, European markets tumbled, with France's CAC 40 down 2.2%, Germany's DAX down 0.8% and London's FTSE down 1.5%.
Asian markets fell. Japan's benchmark Nikkei index lost 3.3% as investors reacted to the European debt crisis after a long holiday. The Hong Kong Hang Seng lost 1% and the Shanghai Composite lost 1%.
The dollar and commodities: The dollar rallied early versus the euro, with the European currency falling to its lowest level since March of 2009. But by late day, the dollar had turned lower. It also fell versus the Japanese yen.
U.S. light crude oil for June delivery dropped $2.86 to settle at $77.11 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery rose $22.30 to settle at $1,197.30 per ounce.
Bonds: Treasury prices rallied, lowering the yield on the 10-year note to 3.40% from 3.55% Wednesday. Treasury prices and yields move in opposite directions.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.34%||3.51%|
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|15 yr refi||2.63%||2.72%|
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