Is it time to panic?

At times on Thursday, it felt like the answer was yes. The financial markets were rocked by rising anxiety over the credit crisis in Europe, waves of program trading and by a possible human error.

In response, investors sold everything from stocks and bonds to commodities.

In a day of extreme volatility that felt a bit like the sell-offs triggered by the collapse of Lehman Brothers in September 2008, the Dow ended the day 3 percent lower. It had been down about 9 percent, or 1,000 points, earlier in the afternoon. It was the biggest intraday loss since 1987. The VIX, a Chicago Board Options Exchange measure of volatility, rose the most since 2007, reflecting fears about Europe.

Shares of Procter and Gamble, a Dow component, plunged from $60 to $39.73, possibly as the result of a trader who accidentally put in an order to sell $16 billion worth of futures, not $16 million, according to reports.

The broader market was rocked, too. The Nasdaq fell 3.44 percent, and the S&P 500 ended the day 3.27 percent lower. As expectations about economic growth sank, oil prices fell 3.9 percent to $76.85 a barrel. The only buying was in safe havens such as the 10-year U.S. Treasury bond, which rose 1 13/32 to 102 2/32, pushing the yield down to 3.38 percent. The price of gold soared 2.93 percent to $1,209 an ounce, breaching the $1,200 barrier even faster than predicted.

Senator Ted Kaufman called for a review of Thursday's plunge, much of which occurred in a matter of a few minutes. Kaufman said the role of high speed, or high frequency, trading needed to be examined.

“As I said on the Senate floor today, the growing sovereign debt and banking crisis in Europe is very troubling. The U.S. needs to get its financial house in order through strong Wall Street reforms that will serve as a lasting bulwark against financial instability," said Kaufman, a Democrat from Delaware.

“I also have been warning for months that our regulators need to better understand high frequency trading, which appears to have played a role today when the US market dropped 481 points in 6 minutes and recovered 502 points just 10 minutes later. The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today. The battle of the algorithms–not understood by nor even remotely transparent to the Securities and Exchange Commissio—simply must be carefully reviewed and placed within a meaningful regulatory framework soon," he said.

While technology and error seem to have made the sudden, brief selloff worse, the episode also reflected deep concern about market fundamentals. Lawmakers in Greece approved austerity measures necessary to seal a $146 billion bailout from the EU and the IMF and ease the immediate threat of default later this month. But even that wasn't enough to erase the image of violent protests in Athens on Wednesday, in which three people including a pregnant woman were burned to death. An image of a Greek riot policeman who was hit by a Molotov cocktail and engulfed in flames made its way around the world as well.

It's been clear for months that the crisis in Greece would not go away and threatened to spread to other highly indebted countries such as Portugal, Spain, Ireland, and Italy. Now there are growing fears that the stronger European economies such as Germany, France, and the U.K. may be hit harder as well. Credit default swaps, a form of insurance against default, have been rising on debt from Germany and France, Zerohedge reported earlier today. And the rising credit risk isn't limited to the sovereign market. Corporate credit is vulnerable too. If the crisis can't be contained, it could cause increasing problems in the United States as well as Europe.

There are growing concerns that the euro could collapse as a result of pressure on the European financial system, which imposes one set of interest rates and borrowing caps on 16 nations that have very different economic profiles.

Looking forward, much will depend upon whether the people of Greece can ultimately accept the spending cuts that will help reduce national debt from nearly 14 percent to the 3 percent European limit. German lawmakers approved the bailout package on Friday.

The stock markets in the U.S. opened lower again on Friday, despite a report that showed the economy created 290,000 jobs in April, beating an estimate of 200,000. The jobless rate rose to 9.9 percent as more workers started to look for jobs. A significant number of the new jobs were census workers, a temporary boost.

If the markets can start focusing on fundamental news such as jobs creation, it will be an encouraging sign that the financial contagion that has rattled the markets during the last week can be contained.

If not, the sense of panic that gripped the markets, at least for a period of time on Thursday, could return.