Big drop: Was it all a mistake?

NEW YORK - A computerized sell-off, possibly caused by a typographical error, triggered one of the most turbulent days in Wall Street history Thursday and sent the Dow Jones industrial average to a loss of almost 1,000 points, nearly a tenth of its value, in less than half an hour.

It was the biggest drop ever during a trading day.

The Dow recovered two-thirds of the loss before the closing bell, but that was still the biggest point loss since February of last year. And even with the partial recovery at the close, the decline cost investors $462 billion, based on the Dow Jones U.S. Total Market Index.

The lightning-fast fall temporarily knocked normally stable stocks such as Procter & Gamble Co. to a tiny fraction of their former value and sent chills down investors' spines. In a span of two seconds Thursday shares of Radian Group Inc., a Center City mortgage insurer, plunged from $8.38 to a penny and then back again to $8.38.

On the trading floor of the New York Stock Exchange, traders shouted or watched open-mouthed as the screens lit up with prices plummeting and as phones rang off the hook. In Philadelphia, Theodore R. Aronson of Aronson, Johnson & Ortiz L.P., a money-management firm with $20 billion in assets, said: "It was almost like 'The Twilight Zone.' "

No one was sure what happened, other than that automated orders were activated by erroneous trades. One possibility being investigated was that a trader accidentally placed an order to sell $16 billion, instead of $16 million, worth of futures, and that was enough to trigger sell orders across the market.

No one was taking blame, either. The New York Stock Exchange said there was no problem with the Big Board's systems, and all the markets were on a conference call with the Securities and Exchange Commission.

Nasdaq issued a statement two hours after the market closed, saying it was canceling trades that were executed between 2:40 and 3 p.m. that it called clearly erroneous. It did not, however, mention a cause of the plunge.

The NYSE also said it would cancel some trades on its electronic platform.

The SEC issued a statement saying regulators were reviewing what happened and "working with the exchanges to take appropriate steps to protect investors."

Whatever started the sell-off, automated computer trading intensified the losses. The selling only led to more selling as prices plummeted and traders tried to limit their losses.

"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 Inc.

The market was already wobbly because of fears that Greece's debt crisis would undermine the economic recovery. Traders watched television coverage of protests on the streets of Athens, and the Dow was down 200 when the sell-off began less than two hours before the closing bell.

At 2:20 p.m., the Dow was at 10,460, a loss of 400 points.

It then tumbled 600 points in seven minutes to its low of the day of 9,869, a drop of 9.2 percent.

Meanwhile, in Washington, a team of Treasury officials began combing through market tapes trying to figure out what was going on. By the evening, they still had not got to the bottom of it, but they discovered some aberrations - market blips - in trading coming out of Chicago.

When Treasury Secretary Timothy F. Geithner looked at his BlackBerry and saw the market was down nearly 9 percent, he told colleagues it had to be a mistake.

Then the market bounced back, about as quickly as it fell. By 3:09 p.m., the Dow had regained 700 points. It then fluctuated sharply until the close. The trading day ended with the Dow down 347.80, or 3.2 percent, at 10,520.

At its lowest Thursday, the Dow was down 998.50 points in its largest point drop ever, eclipsing the 780.87 lost during the course of trading on Oct. 15, 2008, at the height of the financial crisis. The Dow closed that day down 733.08, the biggest closing loss it has ever suffered.

The effect of Thursday's gyrations on some stocks was breathtaking, if brief. Stock in consulting firm Accenture Ltd. fell to 4 cents after closing at $42.17 on Wednesday. It recovered to close at $41.09, down $1.08. Procter & Gamble, generally a stable stock, dropped as much as $23, almost 37 percent, and rallied to close down only $1.41.

Even if technical issues played a role in the drop, concerns about the world economy are running high.

"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 & Co. L.L.C. "Europe is a major trading partner of ours, and this threatens the entire global growth story."

The Standard & Poor's 500 index, the one most closely watched by market pros, fell 37.72, or 3.2 percent, to 1,128.15. The Nasdaq composite index lost 82.65, or 3.4 percent, and closed at 2,319.64.

At the close, losses were so widespread that just 173 stocks rose on the NYSE, compared with 3,008 that fell. The major indexes were all down more than 3 percent.