SALON

Thursday, May 6, 2010 8:28 PM UTC

Stock market roller coaster of doom

Fears of a European meltdown cause a Wall Street freak-out, as the Dow plunges 1,000 points before rebounding

By

Topics: European Financial Crisis, Greece, How the World Works,

Stock market roller coaster of doom

A stock market crash has a funny way of focusing attention. Thursday’s wild gyrations in the Dow — dropping nearly 1,000 points in a nausea-inducing free fall at one juncture, then shooting immediately back up before closing “only” 350 points down — undoubtedly spawned an outbreak of anxiety attacks and flashbacks to the crazy days of fall 2008 in Wall Street and Washington. The frenzy was so great that Bloomberg News and Yahoo Finance couldn’t handle the Web traffic (although Google Finance sailed right along). But that’s to be expected when the Dow registers its worst intraday loss since 1987.

Despite a few TV pundits arguing that fears about the course of bank regulation were contributing to the stampede, or that a computer glitch or incorrectly inputted trade triggered the panic, the clear underlying driver for the crash was the concern about a spreading sovereign debt crisis in Europe.

Forget about too-big-to-fail insolvent banks. Today’s nightmare is a vision of insolvent countries knocking each other down like a line of dominos, with street riots and brutal recessions breaking out all over. The credit crunch of 2007-2008? Today’s panic suggested that past troubles might be merely a prelude to a much more devastating crisis.

Market participants seem to believe that European leaders are not taking forceful enough steps to stop the bleeding. They’re looking back longingly at the steps taken by Bernanke’s Fed to take every toxic asset it could buy off the hands of the banks, and wondering why the European Central Bank can’t apply the same strategy to government bonds.

This storyline will be with us for awhile. Even if  a Citibank trader did turn another bad day in the market into an apocalyptic meltdown by sending a sell order denominated in billions instead of millions (a hanging offense, if I ever heard one), or a computer error trashed Procter & Gamble’s stock price,  the U.S. stock market is hardly the only indicator light flashing red. The euro dropped to a 14-month low, yields on “safe” U.S. Treasuries plunged, while spiking up on Greek, Spanish and Italian bonds, and credit market spreads signaled more stress in financial markets than we’ve seen in months.

Whatever the case, we’ve clearly entered a new stage in the crisis. Hang on tight.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21. More Andrew Leonard.

Next Article

Related Stories

More Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
    Credit: AP/LM Otero

  • Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
    Credit: AP/Matt Rourke

  • A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
    Credit: AP/Jenny Aicher

  • Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
    Credit: AP/Molly Riley

  • Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
    Credit: AP/J. Scott Applewhite

  • Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
    Credit: AP/Carolyn Kaster

  • O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
    Credit: AP/Las Vegas Review-Journal/Jeff Scheid

  • Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
    Credit: AP/NASA/Chris Hadfield

  • When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
    Credit: AP/Jacquelyn Martin

  • A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
    Credit: AP/The Duluth News-Tribune/Clint Austin

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Related Videos

Comments

 20 Comments

Comment Preview

Your name will appear as username

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>

follow salon

Most Read

Popular on Reddit

links from salon.com

From Around the Web

Presented by Scribol
listener_new_rect The Listener: So long, Sookie Stackhouse

Recommendations