Something like this usually happens at least once, (if you're lucky), in everybody's lifetime if you work with animals. I've made more mistakes than my fair share & some of those were my own fault. This wasn't yours - you had checked the situation out & everything was as it should be at the time. You just can't watch 24-7. It isn't practical. Don't beat yourself up & most importantly, don't give up! Replace the failing equipment and try again. I remember one time I thought my digital thermometer was reading 110, but the display was failing due to needing a new battery & the first zero was not showing up completely. I always keep two in there now -1 digital which also reads the humidity level & 1 old-fashioned mercury thermometer that the unit came with.
I hope your thermometer is just going bad & the babies are fine. Good luck to you.