from the Wall Street Journal:
The stock market posted its steepest drop since the anxious days of early 2009, as worries that Europe's debt crisis would weigh heavily on global growth sent investors fleeing out of risky assets.
The declines accelerated late in the session, leaving both the Dow Jones Industrial Average and the Standard & Poor's 500 off more than 10% from their recent highs, the traditional Wall Street definition of a correction.
In the current plunge, some participants are worried that there could be further losses, that perhaps the bull run itself has crested. For many investors, Europe's recent struggles have conjured fears akin to those that resulted from the late-2008 meltdown of Lehman Brothers Holdings, which roiled the U.S. financial system.
"No matter how we slice all the chart data, there's no reason for anyone to have any exposure to the long side of the stock market here," said Walter Zimmerman, chief technical analyst at United-ICAP. "We have a serious unfolding debt crisis in Europe that very much looks capable of heading to a wave of sovereign-debt defaults."
The Dow slid 376.36 points, or 3.6%, to end down 10068.01, off 10.2% from its 2010 high and its biggest point drop since Feb. 10, 2009. The S&P fell 3.9% to end at 1071.59, down 12% from its high, its biggest point drop since Jan. 20, 2009. Every Dow component was down and only three stocks gained in the S&P.
The Nasdaq Composite Index, which first moved into correction territory on May 7, has moved back and forth above the 10%-down threshold since. But it is now back below the mark after plunging 4.1% on Thursday to end at 2204.01, off 12.9% from its 2010 high.
Shares of industrial and commodity-producing companies led the decline as worries mounted that Europe's debt woes and a possible slowdown of growth in China will sap global demand. Other markets around the world, from the Australian dollar to metals, tumbled as investors shed riskier assets in favor of safer bets such as U.S. Treasurys.
The dollar managed a 1% improvement against the euro, which traded late in New York at $1.2511 following a volatile series of moves throughout the day. But analysts believe the outlook for the common currency remains bleak measured over the longer haul, off 14.4% so far this year versus the dollar, including a heavy dose of selling since the European Union announced a $1 trillion bailout for its most heavily indebted members.
"With the euro weaker, you're going to have an impact on earnings," for big U.S. multinational companies that have become increasingly reliant on overseas revenue the last few years, said Bernie Williams, assistant vice president and portfolio manager at USAA Investment Management. "Everybody's assuming the worst."
Jitters over Europe persisted as unions went on strike in Greece and investors fretted that trading regulations like those introduced this week in Germany could be adopted in other countries.
The Dow's leading decliners included Alcoa, which dropped 6%, Caterpillar, which fell 4.5%, and Boeing, which slid 4.9%. Financials also weakened as new trading restrictions in Europe and the U.S. Senate's debate over financial legislation continued. Hartford Financial Services slid 7%, while American International Group fell 6.8% and Citigroup slid 4.7%.
Composite trading in New York Stock Exchange-listed companies hit 8.6 billion shares, well above the daily average for 2010.
"A lot of people who have held throughout the bull market are selling right now," said Jim Bianco, president of Bianco Research in Chicago. "That's why the bulls are viewing this as a big problem."
Executives of several major prime brokerages said they expected more margin calls Thursday than normal, but demands for managers to post cash as a result of losses weren't reaching crisis levels and the calls are expected to be met.
Reflecting the market's heightened unease, the CBOE Volatility Index jumped to its highest point since April 2009, posting an intraday high above 46 before pulling back slightly. The measure ended with a 29.6% daily gain, closing at 45.79.
Commodity markets also saw heavy selling with crude futures at one point plunging to their lowest point since July due to demand concerns before rebounding. Nearby futures ended down $1.86 at $68.01 a barrel in New York.
New data added to the worries about the U.S. economy with an unexpected surge in initial claims for jobless benefits.
