NEW YORK — Bedlam swept Wall Street today as the stock market selloff turned into a full-scale panic as the Dow Jones industrial index plunged 508.32 points--the worst one-day drop ever.
That represented a one-day loss of 22.4%, far larger than the 12.8% drop on Oct. 28, 1929, known as Black Monday. The Dow average's worst percentage decline ever was on Dec. 12, 1914, early in World War I, when it lost 24.4% of its value.
The Dow closed today at 1,738.74.
Trading was the heaviest ever recorded at the New York Stock Exchange: 604.4 million shares were traded, far exceeding the 338.48-million share record set Friday.
The plunge wiped out a big part of the gains amassed through the bull market of the past five years.
"I don't have words to describe this," said Suresh Bhirud, an analyst at Oppenheimer & Co.
"What we have is a full-scale financial panic," said Hugh Johnson at First Albany Corp.
Brokers said the market was caught up in a chain reaction of events that created what William LeFevre at Advest Inc. called "a terrible washout" as the trading week began.
Stock markets in Tokyo and London fell sharply in reaction to Wall Street's severe break last week.
On the Big Board, battered Dow stocks included IBM, off as much as 10 1/2 at 124 1/2 and General Electric, down 6 at 44 1/2. The only issues on the gaining list were precious metal miners, reflecting the sharp rise in gold prices in reaction to the declines in financial markets.
Initially, the stock market edged to a fractional gain as investors tried to regroup after last Friday's disastrous fall.
But a further collapse in bond prices and the dollar knocked stocks into the minus column and the selling in the equity market gained momentum of its own.
U.S. bond prices tumbled in early trading today, although they later recovered much of their losses.
LeFevre said it appeared that mutual funds were being forced to sell stocks as their shareholders switched money out of stock funds and into safer money market funds.
In addition, he said, brokers were selling stocks from so-called margin accounts in which investors who bought stocks earlier with borrowed money declined to put up additional collateral.
World markets also had to contend with heightened tensions in the Middle East. The United States confirmed that it had attacked and destroyed an Iranian oil platform in the Persian Gulf.
Bhirud said computer program strategies that allow professional traders to transmit huge orders in a matter of moments exacerbated the rout in the stock market.
Bond prices also plummeted in early, active trading, hammered by the twin pressures of the falling dollar and the worst declines in Wall Street's history.
At mid-morning the Treasury's closely watched 30-year bond was down about 1 point, or $12.50 for every $1,000 in face value. Bond yields, which move inversely to prices, had soared to 10.32% from 10.17% late Friday.
"Really, it's a blood bath," said Elizabeth Reiners, a vice president of investment firm Dean Witter Reynolds. "All of the markets have fallen apart; there's confusion on every front."
Beside the psychological impact of the tumbling stock market, analysts said bond prices were also weakened by the declining dollar--which had fallen to about 141.55 Japanese yen at around midday in New York.