Dow Drops Nearly 1,000 Points Before Paring Loss

The Dow fell nearly 1,000 points at one point during afternoon trading Thursday amid anxiety that European debt woes could derail the nascent global economic recovery. Risk-averse traders piled out of equities and into the relative safety of Treasurys and the U.S. dollar. The euro hit a 14-month low against the greenback. Oil prices plummeted and gold touched $1,200 an ounce.

The wild swings and spike in volatility were reminiscent of the worst days of the credit crisis more than a year-and-a-half ago. Financial stocks took the brunt of the selling as the Greek parliament approved harsh austerity measures that touched off another day of rioting in Athens. The financial sector of the S&P 500 ($INX) dropped nearly 5%, weighed down by JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC) and Goldman Sachs (GS), among other issues, all of which racked up losses of anywhere from 4% to 8%

The Dow Jones Industrial Average ($INDU), suffering through its worst three-day drop since late January, was off about 300 points when it fell off a cliff shortly before 3 p.m. The Dow lost about 700 points in the next 15 minutes and then regained 600 points in the following 20 minutes.

Rumors for the cause 1,000-point drop abounded, from a technical glitch (which the New York Stock Exchange (NYSE) denied) to rumblings, however far-fetched, that Germany would pull out of the European Union. Whatever sparked the selling, there was no place to hide, as even the most defensive sectors took a drubbing. The health care sector lost about 2.5%, while consumer staples dropped 2% and utilities lost 2.3%.

Meanwhile, volatility continued to spike. The S&P Volatility Index -- also known as the VIX ($VIX.X) or "investor fear gauge" -- jumped more than 60%. After dipping below the 9,900 the Dow managed to end the day at 10,519, off 349 points or 3.2%. The broader S&P 500 ($INX) fell 38 points, or 3.3%, to settle at 1,128. The tech-heavy Nasdaq Composite ($COMPX) plunged 83 points, or 3.4%, to 2,320.

Procter & Gamble (PG), a consumer staples stalwart and Dow component, plummeted more than 25% to $45.29 at one point Thursday before recovering to about $60. CNBC reported that it was caused by a trading error at a major firm.

The Dow and S&P are now up just 1% in 2010. The Nasdaq is up just 2.3%.