In one of the most dizzying half-hours in stock market history, the Dow Jones industrial average plunged nearly 1,000 points Thursday afternoon amid worries about European debt. The Dow managed to recover two-thirds of its losses and closed down 347 at 10,520. But all the major indexes lost more than 3 percent in a day that recalled the market turmoil of the 2008 financial crisis.
There were reports that a technical glitch hastened the selling as investors watched protests in the streets of Athens on TV. Fears were running high in the 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 perhaps the U.S.
Investors are "worried that it's not just Greece that needs to cut down on all the government expenses," but that other countries will engage in austerity measures that "would decrease corporate profits around the world," said Michele Gambera, head of quantitative analysis for UBS Global Asset Management.
"The risk emerges that if a large enough number of countries start cutting their expenses, they will increase unemployment in the short term and they will reduce profits," Gambera told NPR.
Dennis Jacobe, chief economist for Gallup said, "What you're seeing today is really something that's reflecting the uncertainties when there's a question about the values of currencies -- foreign debt."
Even as the market started to correct on Thursday afternoon, Jacobe said just being down 300 or 400 points was a huge drop.
"I think people ought to expect a considerable amount of volatility going forward," Jacobe says.
Interest rates plummeted in the bond market as stocks swooned. Traders barreled into Treasurys and the yield on the 10-year Treasury note fell to 3.40 percent, sliding from 3.54 percent late Wednesday. Its yield dipped as low as 3.27 percent, their lowest level in seven months.
With protests in Athens against new austerity measures culminating Wednesday in the death of three people, markets are worried that Greece could fall out of control or that its fiscal problems could affect other weak countries such as Portugal and Spain.
There were hopes that the European Central Bank would announce new measures -- such as buying government bonds -- to ease the debt crisis engulfing the eurozone but none were forthcoming.
Instead, Jean-Claude Trichet put the blame for the crisis firmly on the shoulders of Europe's governments for tolerating lax budgetary controls for years - and before the financial crisis exploded in late 2007.
Greek police fired tear gas to repel stone-throwing protesters after lawmakers approved drastic austerity cuts Thursday needed to secure international rescue loans worth euro110 billion ($140 billion). The clashes followed violent street protests Wednesday that left three people dead after a bank was firebombed.
Greek lawmakers voted 172-121 to approve the austerity measures - worth about euro30 billion ($38.18 billion) through 2012 - that will slash pensions and civil servants' pay and further hike consumer taxes.
The rescue loans are aimed at containing the debt crisis and keeping Greece's troubles from spreading to other countries with vulnerable state finances such as Portugal and Spain. The money will come from the International Monetary Fund and the 15 other governments whose countries use the euro.
European governments are now scrambling to get parliamentary approval for the Greek loans. European leaders will meet on the issue in Brussels on Friday.
Fears of Greek default have undermined the euro, and while the current package should keep Greece from immediate bankruptcy, its long-term prospects are unclear. The country's growth prospects are weak, and the population's willingness to accept cutbacks may wane, leading some economists to predict an eventual debt restructuring somewhere down the road.
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