Thread: Dow Falls Nearly 1,000 Points Before Rebounding

Dow Falls Nearly 1,000 Points Before Rebounding

Thursday, 06 May 2010 03:01 PM

It was a painful flashback to the darkest days of 2008:

The U.S. stock market had one of its most turbulent days ever. The Dow Jones industrials plunged nearly 1,000 points in half an hour amid concerns that Greece's debt problems could halt the world financial recovery.

The Dow managed to recover two-thirds of its losses and closed down 347.80 points, or 3.2 percent, at 10,520.32. But all the major indexes lost 3 percent in a day that recalled the market turmoil of the 2008 financial crisis.

There were reports that a technical glitch hastened the selling.

Even so emotions, were running high. Traders are concerned that Greece's economic problems will hurt other European countries and ultimately, the U.S. recovery.

The Standard & Poor's 500 index was off 37 at 1,128. The Nasdaq composite index was off 82 at 2,319.

Only 173 stocks rose on the New York Stock Exchange while 3,002 fell. Volume came to an extremely heavy 2.57 billion shares.

Meanwhile, traders watched protests in the streets of Athens on TV. Protesters raged against austerity measures passed by the Greek parliament.

But traders were not comforted by the fact that Greece seemed to be working towards a resolution of its debt problems. Instead, they focused on the possibility that other European countries would also run into trouble, and that the damage to their economies could spread to the U.S.

Computer trading intensified the losses as programs designed to sell stocks at a specified level kicked in. Traders use those programs to try to limit their losses when the market is falling. And the selling only led to more selling as prices fell.

"I think the machines just took over. There's not a lot of human interaction," said Charlie Smith, chief investment officer at Fort Pitt Capital Group. "We've known that automated trading can run away from you, and I think that's what we saw happen today."

There were reports that a technical glitch hastened the selling. Stock in the consulting firm Accenture fell to 4 cents after closing at $42.17 on Wednesday. It was priced at about $41 in the last half-hour of trading.

New York Stock Exchange spokesman Raymond Pellecchia said he was unaware of any problems with the exchange's trading systems but was looking into whether an error occurred.

Even if there were technical issues, emotions about the world economy were running high. Down 998.50 points in its largest point drop ever, the Dow recovered to a loss of 505 in a short time.

"The market is now realizing that Greece is going to go through a depression over the next couple of years," said Peter Boockvar, equity strategist at Miller Tabak. "Europe is a major trading partner of ours, and this threatens the entire global growth story."

The stock market has had periodic bouts of anxiety about the European economies during the past few months. They have intensified over the past week even as Greece appeared to be moving closer to getting a bailout package from some of its neighbors.

http://moneynews.com/Headline/US-Wall-S ... /id/358103

This Greek bailout won't help Greece that much. It will just stop them from defaulting on their debt. The bailout is designed to buy more time so that other countries like Spain and Portugal can fix their fiscal and budget woes before they find themselves in a similar situation. Otherwise there could be a domino effect. The same thing could have been done with the big banks. But instead the Federal government let Lehman Brothers go bankrupt.

Stock Selloff May Have Been Triggered by a Trader Error

Published: Thursday, 6 May 2010 | 7:06 PM ET

According to multiple sources, a trader entered a "b" for billion instead of an "m" for million in a trade possibly involving Procter & Gamble [PG 60.75 -1.41 (-2.27%) ], a component in the Dow. (CNBC's Jim Cramer noted suspicious price movement in P&G stock on air during the height of the market selloff. Watch.)

Sources tell CNBC the erroneous trade may have been made at Citigroup [C 4.04 -0.14 (-3.35%) ].

"We, along with the rest of the financial industry, are investigating to find the source of today's market volatility," Citigroup said in a statement. "At this point we have no evidence that Citi was involved in any erroneous transaction."

According to a person familiar with the probe, one focus is on futures contracts tied to the Standard & Poor’s 500 stock index, known as E-mini S&P 500 futures, and in particular a two-minute window in which 16 billion of the futures were sold.

Citigroup’s total E-mini volume for the entire day was only 9 billion, suggesting that the origin of the trades was elsewhere, according to someone close to Citigroup’s own probe of the situation. The E-minis trade on the CME.

A CME spokesman said it found no problems with its systems.

The Nasdaq and New York Stock Exchange took the unusual step of declaring that they would cancel some trades that took place during the height of the selloff. Both markets said they will cancel all trades more than 60 percent above or below market that occurred between 2:40 p.m. and 3:00 p.m. New York time.

Other market sources said the erroneous trading involved the IWD exchange-traded fund or the S&P 500 Mini, according to Reuters. A person close to BlackRock, which manages the IWD, said there was no unusual trading in the iShares product.

Amid the sell-off, Procter & Gamble shares plummeted nearly 37 percent to $39.37 at 2:47 p.m. EDT, prompting the company to investigate whether any erroneous trades had occurred.

The shares are listed on the New York Stock Exchange, but the significantly lower share price was recorded on a different electronic trading venue.

"We don't know what caused it," said Procter & Gamble spokeswoman Jennifer Chelune. "We know that that was an electronic trade...and we're looking into it with Nasdaq and the other major electronic exchanges."

A different P&G spokesman had said earlier the company contacted the Securities and Exchange Commission, but Chelune said that he spoke in error.

One NYSE employee leaving the Big Board's headquarters in lower Manhattan said the P&G share plunge lay at the center of whatever happened.

Biggest Market Drops EverSpreads Spike Wider as Stocks Selloff, Greek ContagionEuro Shares Fall for 3rd Day to 2-Month LowEurope Worries Rock Asia, Nikkei Down 3.3%Gold Hits $1,200, Settles at Highest Since NovemberOil Settles Near $77 on Euro Zone Debt WorriesEuro Drops Below $1.26 vs Dollar on Greece Fears
"I'll give you a tip," the employee said, speaking on condition of anonymity. "P&G. Check out the low sale of the day. Something screwed up with the system. It traded down $30 at one point."

Nasdaq said it was working with other major markets to review the market activity that occurred between 2:00 p.m. and 3:00 p.m., when the market plunge happened.

The exchange later said it was investigating potentially erroneous transactions involving multiple securities executed between 2:40 and 3:00 p.m.

Nasdaq also said participants should review their trading activity for potentially erroneous trades.

The massive selloff, which began shortly after 2 p.m. ET, amplified concerns about the spreading European debt crisis as the approval of austerity measures by the Greek Parliament sparked renewed rioting in Athens.

"There is simply a growing recognition that Greece has got to default," banking analyst Dick Bove told CNBC.com. "The riots in the streets showed the decision to repay the debt was not going to be made by the people in Germany, France and Switzerland—it's going to be made by people in Greece and they're not going to repay it."

There also is a growing sense that any collapse of Greece could trigger a wave of defaults across Europe and even the world.

"We've seen a crisis start in a country—Greece—become regional, impact the whole of the Euro zone and is on the verge of truly going global," El-Erian, CEO of the world's biggest bond fund, told CNBC shortly before the selloff began. (Click here for story)

—Reuters contributed to this report

http://www.cnbc.com/id/36999483

May 06, 2010

Nasdaq to cancel certain trades from this afternoon

06:30 PM

Nasdaq has announced that it will cancel certain trades executed between 2:40 p.m. and 3 p.m. ET, Reuters says.

Reuters writes, in the densely precise language of finance, that it covers all trades executed that were "60% away from the consolidated last print in that security a 2:40 p.m. or immediately prior."

Nasdaq will publish the affected stocks and "break points" soon.

http://content.usatoday.com/communities ... fternoon/1