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The Dow Jones Industrial Average had its biggest intraday loss since the market crash of 1987, the euro slid to a 14-month low and yields on Greek, Spanish and Italian bonds surged on concern European leaders aren’t doing enough to stem the region’s debt crisis. U.S. Treasuries soared.

New York Stock Exchange spokesman Rich Adamonis said “there were a number of erroneous trades” during the plunge. The NYSE told CNBC that there were no system errors as speculation of erroneous trades swirled through the market. The Nasdaq OMX Group Inc. said it is working with other markets to review the plunge.

The Dow average lost as much as 998.5 points, or 9.2 percent, before paring its drop to 348.63 points at the 4 p.m. close of trading in New York. It ended the day at 10,519.49, a two-month low. The Standard & Poor’s 500 Index fell as much as 8.6 percent, its biggest plunge since December 2008, before trimming declines to end down 3.3 percent at 1,128.03.

“It’s panic selling,” said Burt White, chief investment officer at LPL Financial in Boston, which oversees $379 billion. “There’s concern that the European situation might cool down global growth and freeze the credit markets.”

European Central Bank President Jean-Claude Trichet held interest rates at a record low of 1 percent today and said the bank didn’t discuss whether to purchase government bonds to stem the region’s debt crisis, defying market speculation that he would take such measures.

The euro maintained losses even as Greece’s parliament approved austerity measures demanded by the European Union and International Monetary Fund as a condition of its 110 billion euro ($140 billion) bailout.

Market ‘Horrified’

“The ECB can fix this instantly by doing what the Fed has done — instantly providing liquidity by buying bad fixed-income instruments and paying cash in U.S. dollars,” said David Kovacs, head of quantitative strategies at Turner Investment Partners in Berwyn, Pennsylvania, which manages $18 billion. “The reason the market is horrified now is Trichet said it’s not even being discussed. Smart investors are basically selling risk assets.”

The MSCI Asia Pacific Index joined the MSCI World Index and the Stoxx 600 Index in wiping out its advance for 2010. The Dow and S&P 500 briefly erased their yearly gains before paring losses.

Bank of America Corp., Hewlett-Packard Co. and American Express Co. tumbled more than 4.5 percent to lead declines in the 30-stock Dow average.

The benchmark index for U.S. stock options surged as much as 63 percent, the most since February 2007, to 40.71 before paring its advance to 37 percent. The VIX, as the Chicago Board Options Exchange Volatility Index is known, measures the cost of using options as insurance against declines in the S&P 500.

Treasury Yields

Yields on benchmark 10-year Treasury notes plunged 16 basis points to 3.377 percent on demand for assets considered the most safe. The Dollar Index, which measures the currency against six major trading partners, jumped as much as 1.4 percent. The yen and Swiss franc also strengthened.

Yields on Fannie Mae and Freddie Mac mortgage securities that guide U.S. home-loan rates jumped the most relative to Treasuries in almost a year.

Spreads on Fannie Mae’s current-coupon 30-year fixed-rate mortgage bonds widened about 0.1 percentage point to 0.89 percentage point more than 10-year Treasuries as of 2:45 p.m. in New York, the biggest jump since May 27, according to data compiled by Bloomberg.

The gap touched a record low of 0.59 percentage point on March 29 as the Federal Reserve that month completed its purchases of $1.25 trillion of agency mortgage bonds.

“Fear is taking over, and images of Greek mobs aren’t helping,” said Larry Peruzzi, equity trader at Cabrera Capital Markets in Boston, Massachusetts, referring to televised images of demonstrations against austerity measures in Athens. “Buyers are stepping aside and disregarding fundamentals.”

–With assistance from Mark Gilbert and Keith Jenkins in London, Simon Kennedy in Paris, Simone Meier in Dublin, John Detrixhe, Elizabeth Stanton, Inyoung Hwang and Michael Tsang and Mark Shenk in New York and Pham-Duy Nguyen in Seattle. Editors: Chris Nagi, Dan Hauck.

BW

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