NEW YORK – Stocks plunged Thursday as investors succumbed to fears that Greece's debt problems would halt the global economic recovery. The Dow Jones industrials slid almost 1,000 points before recovering to a loss of 328.
The sudden drop was a painful flashback to the worst days of the 2008 financial crisis. Computer programs intensified the selling while investors watched protests in the streets of Athens on TV. Fears are running high in the financial markets that the Greek government will not be able to implement austerity measures that would enable it to contain its debt problems. And, in turn, that the country's problems will hurt other economies in Europe and even the U.S.
The Dow's gyrations showed the high emotions in the markets. Down 998.50 points in mid-afternoon, it recovered less than an hour later to a loss of 328. Meanwhile, interest rates on Treasurys soared as investors sought the safety of U.S. government debt. The yield on the benchmark 10-year note, which moves oppoosite its price, fell to 3.37 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."
The stock market has had periodic bouts of anxiety about the European economies during the past few months. They have intensified over the past week even as Greece appeared to be moving closer to getting a bailout package from some of its neighbors.
The fear now is that other countries will also be overwhelmed by their debt, and the recovery that is in its early stages will be wiped out. That would almost inevitably affect the U.S. recovery.
The losses in stocks were so widespread that just 161 stocks rose on the New York Stock Exchange, compared to 3,008 that fell. The major indexes were all down more than 3 percent.
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For more on the riots in Greece, click here