Wall Street plunges as trading glitch suspected

US stocks plunged nine per cent in the last two hours of trading yesterday 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.

Declining stocks outnumbered advancers on the New York Stock Exchange by more than 17 to one. Volume soared to it highest level this year by far.

The Dow Jones industrial average dropped 347.80 points, or 3.20 per cent, to 10,520.32. The Standard & Poor's 500 Index fell 37.75 points, or 3.24 per cent, to 1,128.15. The Nasdaq Composite Index lost 82.65 points, or 3.44 per cent, to 2,319.64.

The sell-off was broad and deep with all 10 of the S&P 500 sectors falling two to four per cent. The financial sector was the worst hit with a fall of 4.1 per cent.