Stocks plunge as trading glitch suspected Specialists work on the floor of the New York Stock Exchange May 6, 2010. REUTERS/Lucas Jackson On Thursday May 6, 2010, 4:51 pm By Edward Krudy NEW YORK (Reuters) - Stocks plunged 9 percent in the last two hours of trading on Thursday before clawing back some of the losses as the escalating debt crisis in Europe stoked fears a new credit crunch was in the making. The Dow suffered its biggest ever intraday point drop, which may have been caused by an erroneous trade entered by a person at a big Wall Street bank, multiple market sources said. Indexes recovered some of their losses heading into the close but equities had erased much of their gains for the year to end down just over 3 percent, the biggest fall since April 2009. "We did not know what a stock was worth today, and that is a serious problem," said Joe Saluzzi of Themis Trading in New Jersey. Traders around the world were shaken from their beds and told to start trading amid the plunge as investors sought to stem losses in the rapid market sell-off. Declining stocks outnumbered advancers on the New York Stock Exchange by more than 17 to 1. Volume soared to it highest level this year by far. Nasdaq said it was investigating potentially erroneous transactions involving multiple securities executed between 2:40 p.m. and 3 p.m. Investors had been on edge throughout the trading day after the European Central Bank did not discuss the outright purchase of European sovereign debt as some had hoped they would to calm markets, but gave verbal support instead to Greece's savings plan, disappointing some investors. The Dow Jones industrial average dropped 347.80 points, or 3.20 percent, to 10,520.32. The Standard & Poor's 500 Index fell 37.75 points, or 3.24 percent, to 1,128.15. The Nasdaq Composite Index lost 82.65 points, or 3.44 percent, to 2,319.64. The sell-off was broad and deep with all 10 of the S&P 500 sectors falling 2 to 4 percent. The financial sector was the worst hit with a fall of 4.1 percent. Selling hit some big cap stocks. Bank of America was the biggest percentage loser on the Dow, falling 7.1 percent to $16.28. All 30 component of the Dow closed lower. An index known as Wall Street's fear gauge, the CBOE Volatility Index closed up more than 30 percent at its highest close since May 2009. It had earlier risen as much as 50 percent. The mounting fears about a spreading debt crisis in Europe curbed the appetite for risk and put a report of weak U.S. retail sales into sharper relief. Most top retail chains reported worse-than-expected same-store sales for April, sparking concerns about consumer spending, the main engine of the U.S. economy. That hit shares including warehouse club Costco Wholesale Corp, which fell 3.9 percent to $58.03, and apparel maker Gap Inc , which lost 7.2 percent at $22.91. The head of the ECB, Jean-Claude Trichet, said on Thursday that Spain and Portugal were not in the same boat as Greece, but the risk premium that investors demand to hold Portuguese and Spanish government bonds flared to record highs. --

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