DOW Drops 1000 Points, Rebounds To 300 Point Loss

Jillian Bandes
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Posted: May 06, 2010 3:08 PM
The Dow dropped nearly 1000 points before rebounding to a 300-point drop on Thursday afternoon. The drop narrowly avoided the point where stock trades would have been halted for a full hour based on Wall Street regulations. If the drop would've been 1,100 points, futures would've continued trading, but stock trading would've been on hiatus.

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Initial analysis was uncertain as to the cause of the crash. The blame was first pinned on unrest in Greece, and then reports emerged of a faulty trade involving Proctor and Gamble. A trader or computer could have mis-entered a number that devalued the stock and set automated stock-selling mechanisms into play. Other reports said that supposed faulty trade didn't occur until the Dow was already in freefall.

Greek unrest is still a prime suspect  -- their financial turmoil is now threatening Portugal, Spain, and Ireland. The Greek bailout deal isn't finalized, and the markets are reacting, said Fox News' Neil Cavuto.

"This is a classic panic response to a country situation where they're spending more than they're taking in,"
said Cavuto.

Even if Greece does get the money, and the civil unrest subsides, the issue of other countries' solvency is still uncertain, and investors responded accordingly. E.U. bond dealers are demanding full details of Greece's bailout before they will sign off on the plan.

Another factor could have been the Senate's approval of an amendment that would end "too big to fail," which was being discussed as part of the financial reform bill. The major financial houses all suffered significant losses as the result of the stock market volatility.