Update #3, 4:30 p.m.: Edward Harrison, author of the Credit Writedowns blog, lists the varying suggestions that a "faulty Procter & Gamble stock quote" or a Citigroup error caused the panic. He also says "the key to this is what happens in Asia now." Reuters's Felix Salmon floated the idea a bit earlier that we are entering "a new era of volatility." Though he says "the trigger for this particular move could have been anything," he predicts the following:
... we're going to have a turbulent journey into a world where risk assets all price off each other in highly complex and unpredictable ways: a radical change from the old world where credit instruments traded at a spread to governments, while stock investors took solace in the low spreads and high liquidity of commercial paper. In the new world, devastating correlations can appear out of nowhere--and then disappear again just as quickly. And anybody who wants to stay in the market is going to need a very strong stomach.

Update #2, 4:09 p.m.
: Henry Blodget decides he's "not buying that 'typo' caused crash." The rally in past months "has been miraculous, way ahead of fundamentals," and so we were "due for a pullback. Markets do just crash." Zero Hedge concurs, saying CNBC "blaming this on fat finger is most ridiculous thing ever." The closing point leaves the Dow down 350, which Blodget observes was "half [the] 1987 crash on [a] percentage basis."

Ryan Avent, meanwhile, weighs in with a larger post looking at the root of the problem:
In short, markets are signalling some concern with both the sustainability of the global economic recovery and conditions in financial markets. And this is mostly due to the uncertainty associated with the situation in Europe. European leaders need to get ahead of this, and fast. And I suspect that after today, there are some folks in North America and Asia calling them upon on the phone and making sure they understand that.

Update #1: Commentators are now saying a computer glitch may have been "at least part of the problem." The Atlantic's Megan McArdle calls this "likely ... the drop was just too sudden, as was the recovery." The rumor is that a trader typed in "billion" instead of "million." Meanwhile, Joe Weisenthal calls this video of folks going crazy at CNBC during the volatility an "instant classic":


The Dow Jones tanked Thursday afternoon, plunging a dizzying 1,000 points before bouncing back to 500 points below opening. Business commentators flooded Twitter with second-by-second updates. "Stating obvious," tweeted former Wall Streeter Henry Blodget, " but this is a bonified market crash. Absolute panic as buyers disappear." What is happening? Here's what commentators make of the plunge as it continues unfolding.
  • 'Investors Hitting Panic Button on European Chaos,' tweets Blodget at the -350 point mark, before things got even dicier.
  • 'Ladies ... Gentlemen, this is a Market Crash' declares Business Insider's Joe Weisenthal around 2:40. "Europe is exploding. The market is in total freefall. Gold has broken $1200. The euro is trading under $1.26."
  • There Is a Circuit Breaker, reminds Weisenthal's Business Insider colleague Vince Veneziani. He reviews the mandatory halts in trading following sharp drops.
  • Volatility  Author of finance blog Alea tweets the only conclusion everyone can clearly agree on "volatility => elevated."
  • 'Europe Is Obviously the Issue,' declares The Economist's Ryan Avent. "This isn't good," he adds.