NEW YORK — Stocks took their deepest plunge in more than a year Thursday as fears grew that Europe's debt crisis could spread around the world and undermine the U.S. economic recovery. The possibility has been brewing for weeks, but analysts said some investors are just waking up to it.

NEW YORK — Stocks took their deepest plunge in more than a year Thursday as fears grew that Europe's debt crisis could spread around the world and undermine the U.S. economic recovery. The possibility has been brewing for weeks, but analysts said some investors are just waking up to it.

The Dow Jones industrial average fell 376 points, its biggest point drop since February 2009. All the major indexes were down more than 3 percent and are now showing losses for 2010. Interest rates fell sharply in the Treasury market as investors once again sought the safety of U.S. government debt.

The number of people applying for unemployment benefits last week rose unexpectedly, and the Greek government's response to its debt crisis sparked new protests in Athens, but analysts said neither event appeared to set off Thursday's selling.

They said more investors seemed to be grasping the possibility that the U.S. recovery could be in jeopardy, and that many were realizing that the stock market's big rebound since March 2009 may not have been justified.

"The economic recovery story has started to look like a mirage," said Tom Samuels, manager of the Palantir Fund in Houston. "If that's correct, stock prices are well ahead of economic reality."

Investors are concerned that the debt problems in countries such as Greece and Portugal will spill over to other countries in Europe, cause a cascade of losses for big banks and in turn halt economic recovery in the U.S. and elsewhere.

"It's starting to look like one of these tragic stories were one person falls through the ice, then everyone else rushes in to help and ends up drowning," independent market analyst Edward Yardeni said.

They're also worried that China might take steps that will limit its economic growth, which also would affect the U.S. recovery. Analysts said the market is vulnerable to rumors about any of the major economies right now.

The Standard & Poor's 500 was down almost 12 percent from its closing high for the year, which was reached April 23. Most analysts consider a drop of more than 10 percent from a recent high to be a "correction." This is the market's first correction since stock indexes hit a 12-year low in March last year. The fact it has occurred in just 19 trading days shows how anxious traders are right now.

The Chicago Board Options Exchange's Volatility Index — known as the market's fear gauge — leaped almost 30 percent to its highest level since March 2009. The increase in the VIX signals that traders are bracing for more drops in the market.

The VIX closed at 45.79, nearly three times its 2010 low of 15.73, reached April 20. But it's about half of the record high of 89 it reached in October 2008 at the height of the financial crisis.

Analysts said traders were retreating from any investment thought to be too dangerous to own right now. That has meant heavy selling in stocks, commodities and troubled currencies such as the euro.