Stock market volatility returns as Dow drops

The stock market dropped sharply Thursday morning, as growing concern over the financial stability of Europe spooked investors.

The Dow Jones Industrial Average dropped over 300 points, or roughly 3 percent, in the first minutes of the day's trading, and was down by more than 400 points later in the morning. The S&P 500 and NASDAQ stock indexes were both down by more than 4 percent.

The plummet comes after a brief respite from extreme volatility. Stocks were down slightly the last two days, but that paled in comparison to the violent swings of the week prior, which saw the Dow swing to and fro by upwards of 500 points in a single day.

The blue-chip stock index experienced swings of more than 400 points four days in a row earlier in the month for the first time in its 115-year history.

Investor fear was also evident in traditionally safe investments, as yields on Treasury bonds fell while the price of gold grew to over $1,800 an ounce, after falling slightly when markets calmed.

Investors were generally disappointed with the results of a Tuesday meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel as they worked to address the growing debt crisis on their continent. The two leaders announced that they would be creating a new head of finances for the eurozone, but stopped short of any grand plan to address the persistent crisis.

Further driving investor pessimism was a somewhat disappointing report on the number of Americans seeking unemployment benefits. The Labor Department reported Thursday before markets opened that initial claims for jobless benefits had jumped 9,000, to 408,000 — its highest level in a month.

The rough open also came after Morgan Stanley issued a bleak new report on the global economy, which said the world is "hovering dangerously close to a recession."

—Updated at 10:32 a.m.

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