Reminiscent of the chaotic last days of 2008, fear once again gripped Wall Street on Thursday as investors worried that Greece's debt crisis could spread throughout Europe.
At one point, the Dow Jones Industrial Average was down more than 992 points, the biggest intraday drop on record. Depending on the time, a decline of 1,050 points can trigger the “circuit-breaker” that would halt trading for up to an hour.
By the close of trading, though, stocks had rebounded dramatically. For the day, the Dow lost more than 347 points, more than 3 percent, to close at 10,520. The Standard & Poor’s 500 Index lost more than 37 points to close at 1,128. The NASDAQ closed at 2,319, also losing more than 3 percent.
CNBC reported that the steep plunge may have been triggered by an error by a Citigroup trader, who reportedly entered a "b" for billion instead of an "m" for million in a trade apparently involving Procter & Gamble, which saw its shares fall nearly 40 percent in mere minutes.
Citi released a statement saying "We, along with the rest of the financial industry, are investigating to find the source of today's market volatility. At this point we have no evidence that Citi was involved in any erroneous transaction."
For weeks, though, traders have been on edge about the debt crisis in Greece. Greek leaders on Thursday approved a austerity plan necessary to obtain a much needed multi-billion dollar aid package from other European countries, while protesters took to the streets once again.
But investors were left unsettled by what they perceived as a lack of action earlier in the day from Jean-Claude Trichet, the president of the European Central Bank.
“Europe is hanging by a thread right now, and he is telling the world that the Central Bank in Europe is not going to do anything to help,” said Stephen Leeb, with Leeb Capital Management.
Mohamed El-Erian, CEO of Pimco, the world’s largest bond fund, said on CNBC on Thursday that Greece's problems could spread throughout Europe and harm the U.S. economy.
"We've seen a crisis start in a country -- Greece -- become regional, impact the whole of the Euro zone, and is on the verge of truly going global,” El-Erian said.
He also said that the debt burden harming the Greek economy presents an example of issues that the U.S. could face.
"We are not Greece. We have more time. But what the Greek crisis tells you is debt and deficits matter," El-Erian said.
The massive afternoon sell-off was worsened by computer trading programs that can feed on one another.
"Computers turn small declines into big declines,” said Hugh Johnson, chief investment officer with Johnson Illington Advisors. “That’s exactly what happened in 1987,” he said, referring to the stock market crash that happened that year.
A vicious cycle can set in when stock market drops lead to more computer generated orders to sell more stock, which pushes markets down even further. By way of example, shares of tech giant Apple traded throughout the day around $250, but dropped more than 40 points when the entire market plunged. The stock quickly regained most of the loss to close at $246 a share.