Stocks extend plunge on concerns about Greece
NEW YORK — It was a painful flashback to the darkest days of 2008: Stocks plunged and the Dow Jones industrials skidded by hundreds of points as traders succumbed to fears that Greece’s debt problems would halt the global economic recovery.
The Dow lost almost 1,000 points before recovering to a loss of 505 as traders watched protests in the streets of Athens on TV. Protestors raged against austerity measures passed by the Greek parliament. But traders were not comforted by the fact that Greece seemed to be working towards a resolution of its debt problems. Instead, they focused on the possibility that other European countries would also run into trouble, and that the damage to their economies could spread to the U.S.
Computer trading intensified the losses as programs designed to sell stocks at a specified level kicked in. Traders use those programs to try to limit their losses when the market is falling. And the selling only led to more selling as prices fell.
“I think the machines just took over. There’s not a lot of human interaction,” said Charlie Smith, chief investment officer at Fort Pitt Capital Group. “We’ve known that automated trading can run away from you, and I think that’s what we saw happen today.”
There were reports that a technical glitch hastened the selling. Stock in the consulting firm Accenture fell to 4 cents after closing at $42.17 on Wednesday. It was priced at about $41 in the last half-hour of trading.
New York Stock Exchange spokesman Raymond Pellecchia said he was unaware of any problems with the exchange’s trading systems but was looking into whether an error occurred.
Even if there were technical issues, emotions about the world economy were running high. Down 998.50 points in its largest point drop ever, the Dow recovered to a loss of 505. Meanwhile, interest rates on Treasurys soared as traders sought the safety of U.S. government debt. The yield on the benchmark 10-year note, which moves oppoosite its price, fell to 3.39 percent from late Wednesday’s 3.54 percent.
“The market is now realizing that Greece is going to go through a depression over the next couple of years,” said Peter Boockvar, equity strategist at Miller Tabak. “Europe is a major trading partner of ours, and this threatens the entire global growth story.”