Dow drops 250 points, Nasdaq loses 1.7%

NEW YORK -- The benchmark Standard & Poor's 500 index dropped back into the red for 2015 and the Dow Jones industrial ended down 252 points at 17,478 Thursday after the European Central Bank announced fresh stimulus efforts that didn't meet the lofty expectations of investors.

The Nasdaq composite fell hardest, losing 1.7%. Both the Dow, which had been down as much as 300 points earlier, and the S&P 500 fell 1.4%. The S&P ended with a 2015 loss for the first time in more than two weeks, leaving the Nasdaq as the only of the big three U.S. stock indexes still in the black for the year.

ECB president Mario Draghi didn't deliver on the market's hopes for a steep interest rate cut, and the failure to give the market the amount of stimulus it hoped for caused the euro to spike against the dollar, a development that hinders the ECB's ability to jump-start growth and boost dangerously low inflation. A stronger euro makes European exports more expensive and less competitive.

Olivia Nalos Opre: Why we hunt, even lions

Stock markets around the globe swooned on the ECB news, as traders also interpreted Draghi's inability to push through a more aggressive package as a signal that it will be more difficult for Draghi to get inflation moving higher as hoped.

The big pain was felt in Europe, where shares plunged. The broad Stoxx Europe 600 closed down 3.1% and stock market indexes in Germany and France tumbled 3.6%. Losses then spread to Wall Street.

In a sign of the high anxiety on Wall Street, the VIX -- the stock market's "fear gauge" -- jumped as much as 20% before ending the day up 14%.

The European Central Bank cut its so-called deposit rate further into negative territory by a tenth of a percentage point to -0.3%; but the market was looking for a bigger cut of 0.2%. And although the ECB extended its bond-buying program six months past its initial September 2016 end point and increased the number and types of bonds it can purchase, investors felt the economic-boosting measures didn't go far enough. The ECB also failed to increase the euro amount of its monthly bond purchases, opting to stick with the current 60 billion euros per month, whih also fell short of expectations.

"Chalk this one up as a major disappointment: the ECB failed to deliver on high expectations for more easing," Christopher Vecchio, currency analyst at DailyFX told clients in a research note.

Sears loss narrows, but sales still fall in Q3

Why is racism still a problem in America?

"Draghi has over promised and under delivered," added Patrick O'Donnell of Aberdeen Asset Management. "Everyone was expecting Draghi to be the white knight for Europe once again and he hasn't really showed up."

The closely watched move in Europe came just a day after the head of the Federal Reserve reiterated that the U.S. central bank was leaning towards hiking borrowing costs this month for the first time in nearly a decade.

The ECB's moves to boost stimulus contrasts with the direction the Fed, which is moving closer to pushing raising rates higher amid an improving job market.

Markets are bracing for the potential fallout from the different directions that the Fed and ECB are moving in terms of support for markets.

Wall Street on Friday also faces the November employment report. If the U.S. economy continued to create jobs at a solid pace last month, after producing a better-than-expected 271,000 jobs in October, it will virtually cement a Fed rate hike on Dec. 16, barring any shocks between now and then.

Oil prices, which tumbled Wednesday, were also higher, with a barrel of U.S. crude up $1.27, or 3.2%, to $41.21.

Oil investors will be closely watching Friday's meeting of the Organization of the Petroleum Exporting Countries for any signs that OPEC is considering a daily production cut in the face of a supply gut.

Adam Shell on Twitter: @adamshell.