Rolfe Winkler

On the sudden 998 point drop in the Dow, CNBC says:

One trader, on the condition of anonymity, said he heard fixed-income desks in Europe shut down early because there was no liquidity — basically European banks are halting lending right now.”This is similar to what took place pre-Lehman Brothers,” the trader said.

But in the final 15 minutes of trading it was revealed that a trader at a major firm may have mistyped a trade as billions — instead of millions — which made what would’ve been a 300-point selloff more like a 900-point selloff.

Word is the firm in question is Citigroup. And the trade may have had something to do with an ETF referencing the Russell 1000 index, ticker IWD. A trade appears to have printed at $0.09 per share, down from $61, before coming right back.

P&G also saw a ridiculously low print near $39, off 37% from where it was trading before recovering most of the decline.

One hears the echo of portfolio insurance collapsing the market in 1987. If indeed a simple trading error caused this plunge, it’s unnerving that broader financial markets are so vulnerable to such things.

Errant trades aside, however, markets are clearly on edge. Interbank lending in Europe has seized up in recent days. The debt contagion that has started in Greece could lead to panic very quickly when investors realize that most major developed economies are facing similar problems.

Meanwhile gold broke back through $1,200…

UPDATE: Accenture also collapsed, to a penny.

UPDATE 2: NYSE Euronext says there “were a number of erroneous trades.”