Updated with P&G statement, information on Nasdaq canceling trades.

NEW YORK ( TheStreet) -- Was the depth of the market's plunge Thursday worsened by a trading error?

A dramatic drop in Procter & Gamble ( PG - Get Report) looks like the smoking gun. The stock went from $60 at around 2:45 pm ET to plunging below $40 in moments. The Dow Jones Industrial Average, which was already down triple digits, sank another 600 points in less than 15 minutes right around that time. It closed off roughly 350 points.

"That doesn't happen unless someone made a huge mistake," a trader that declined to be identified for this story told TheStreet about the P&G trade. The same trader said the latest speculation was that Citigroup ( PG - Get Report) was the firm behind the wrong trade, mistakenly putting in a 15 billion futures sell order, instead of a 15 million one, but the company would not confirm or deny that.

"At this point, we have no evidence that Citi was involved in any erroneous transaction," the company said in an official statement to TheStreet.

Another Citi spokesperson provided the following quote:

"We, along with the rest of the financial industry, are investigating to find the source of today's market volatility," said Jon Diat in an e-mail to TheStreet. "At this point, we have no evidence that Citi was involved in any erroneous transaction."

Bill Stone, chief investment strategist at PNC Wealth Management, described the fall in P&G as "a plunge and a half" and though he couldn't comment on whether a trading error had occurred, he said the action looked unusual on the surface.

"It was a very odd thing to happen to a staple like that," Stone said. "That's the kind of safe haven stock you expect to stabilize the market."

A spokesperson for P&G noted the stock, which finished the day down 2.3% at $60.75, outperformed the broad market on Thursday, and added this about the trading action.

"We aren't in a position to comment on the details of an individual trade today but we believe the trade was an aberration," said P&G spokesperson Jennifer Chelune in an e-mailed statement.

Machine-driven trading was being blamed for at least some of the selling with another anonymous trader commenting that the computer had gone ahead and processed an error that a person would have caught.

The Nasdaq said late Thursday that it would be canceling certain trades that occurred between 2:40 PM and 3:00 PM ET. The stocks involved were not yet known.

"We have coordinated a process among US Exchanges and therefore, pursuant to rule 11890(b), NASDAQ, on its own motion, will cancel all trades executed between 14:40:00 and 15:00:00 greater than or less than 60% away from the consolidated last print in that security at 14:40:00 or immediately prior," the exchange said in a statement. "This decision cannot be appealed. NASDAQ has coordinated this decision with all other UTP Exchanges. NASDAQ will be canceling trades on the participant's behalf. The stocks affected and the break points will be disseminated shortly."

The New York Stock Exchange said its systems "operated normally" in a statement to TheStreet.

>>>Cramer: P&G Stock Drop Evidence of Glitch

The markets rebounded in the last hour of trading, however, and while the Dow still finished the day down more than 300 points, that's a lot better than the plus 1,000-point drop it faced earlier in the session. At the same time, although the depth of the drop may have been exacerbated by a trading error, the forces behind the selling were very real, market observers said.

"This is panic trading across the board," said Paul Mendelsohn, chief investment strategist at Windham Financial, when contacted in the midst of the sell-off. "It's not just stocks. It's panic selling in the euro, in U.S. treasuries, gold buyers, everything. You could see it building all day."

Mendelsohn believes traders are now fearful that growing debt problems in Europe will have devastating implications for the global economy. The uncertainty about whether Germany will back a bailout of Greece was an immediate concern, he says, but the depth of the decline is representative of traders -- institutional and retail alike -- taking dire scenarios even further.

"People are now wondering how China is going to be impacted," says Mendelsohn, noting how much trading the country does with the European Union. "They are asking if this crisis in Greece is going to send the whole world into a double-dip recession."

PNC's Stone was of the same mind.

"This is the fears over Greece coming to a head," Stone said. "People are scared these problems could spread and derail the global economic recovery."

-- Written by Michael Baron in New York.