* Nasdaq briefly falls more than 9 pct
* Greek crisis and contagion fears batter markets
* Euro falls below $1.26
(Recasts throughout, updates prices)
NEW YORK, May 6 (Reuters) - U.S. stocks plunged on Thursday
afternoon, with the Nasdaq at one point falling more than 9
percent and the Dow and S&P briefly turning negative for the
year, and the euro tumbled as fears of a spreading debt crisis
in Europe mounted.
The European Central Bank disappointed investors by failing
to announce fresh measures to help stem the Greek debt crisis.
Jean-Claude Trichet, the ECB president, said the central bank
did not discuss the outright purchase of European sovereign
debt as some investors had hoped for. The ECB gave verbal
support to Greece's savings plan.
The MSCI's all-country world stock index <.MIWD00000PUS>
tumbled 3 percent to 287.42, with investors stepping up sales
as Greek lawmakers approved a 30-billion euro austerity bill
that paved the way for a bailout by the European Union and
International Monetary Fund.
As Greek lawmakers voted, thousands of protesters massed
outside parliament. Riot police fired tear gas as some
protesters hurled bottles and stones and set garbage cans on
fired.
"It's just fear-based selling," said Keith Springer,
president of Capital Financial Advisory Services in Sacramento,
California. "It started out as a catalyst for a market that was
deeply overbought. It's a silly, fear-based decline. ... People
are looking at Greeks throwing bricks and Molotov cocktails."
On Wall Street, the Dow Jones industrial average <>
fell more than 4 percent to 10,428.58, after plunging nearly 9
percent earlier. The Standard & Poor's 500 Index <.SPX> and the
Nasdaq Composite Index <> also fell more than 4 percent.
In currency markets, investors flocked to the safety of the
U.S. dollar, while the Canadian dollar and the Norwegian and
Swedish kroner slid.
"Nothing short of a sensational announcement can help the
euro at this point. And that certainly did not come from
Trichet," said Kathy Lien, a director for currency research at
GFT, in New York.
After dropping to $1.2523, the euro was down 1.5 percent at
$1.2622 <EUR=>, its lowest since March 2009.
The euro has slumped about 5 percent against the dollar
this week and is down almost 12 percent year to date.
The euro, which hit 110.65 yen earlier -- its lowest level
since 2001 --, was on track for its biggest daily loss against
the yen since October 2008, according to Reuters data. It was
last down 5.7 percent at 113.30 yen <EURJPY=>.
Among major currencies, the dollar was only weaker against
the yen, dropping more than 4 percent to as low as 88.03 yen
<JPY=>, according to Reuters data. The level was the lowest for
the dollar since Dec. 2009 and the worst single-day decline
since October 1998.
As Greece struggles to consolidate its budget, fears have
grown over the effect of the crisis on the more vulnerable
members of the euro zone.
"Many expect that Portugal and maybe Spain will follow in
Greece's footsteps and need a bailout from the European Union,"
said John Doyle, foreign exchange strategist at Tempus
Consulting in Washington.
Currency strategists at BNP Paribas said on Thursday the
euro will fall to parity against the U.S. dollar by the first
quarter of 2011. []
BNP said over the past year the net inflow into European
sovereign debt markets has "collapsed." Official accounts,
which had been steady euro buyers and bond investors for years,
have "disappeared."
U.S. Treasuries clung to gains as the stock market staged a
late recovery.
The price on benchmark 10-year Treasury notes <US10YT=RR>
was last up 1-1/32 after rising more than 2 points.
The 10-year yield, which moves inversely to price, was 3.40
percent, down from 3.55 percent late on Wednesday. It is on
track for its biggest single-day drop in nearly nine months.
The pan-European FTSEurofirst 300 <> index closed
down 1.64 percent to 1,006.66, ahead of the mass sell-off later
in the day. The fall was softened as BNP Paribas <BNPP.PA> beat
expectations on first-quarter profit. Its chief executive
officer called scenarios for contagion of Greece's crisis
"unfounded" even as the French bank revealed a 5 billion euro
exposure to the country.
(Editing by Leslie Adler)
