Stock Market: Biggest Intra-Day Drop Ever

The Dow Jones Industrial Average dropped a whopping 1,000 points at one pointtoday, it's biggest intra-day drop ever. It later rebounded somewhat so that the final drop was 347.80 points.

Algorhithms may be the culprit.

High-speed trading, which uses sophisticated computer algorithms based on specific scenarios to automate transactions at speeds in the millionths of a second, now accounts for about 60 percent of U.S. equity volume.

"The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today," Senator Edward Kaufman said in a statement.

Or, it might have been circuit breakers. Bloomberg has more here.

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    Watched this happen (5.00 / 1) (#5)
    by gyrfalcon on Thu May 06, 2010 at 11:57:42 PM EST
    on TV and my hair stood straight up on top of my head as my jaw fell open.  This all happened -- streaking from an ugly 300-plus down to an unbelievable 998 down and back up to 300-plus again -- in less than five minutes.  Absolutely dizzying.

    Maybe this incident will arouse support for (5.00 / 1) (#6)
    by Jack E Lope on Fri May 07, 2010 at 07:48:00 AM EST
    ...a financial transaction tax, much like the US had on stock transactions until the mid-sixties.

    Pretty hard... (5.00 / 1) (#8)
    by kdog on Fri May 07, 2010 at 08:35:07 AM EST
    to convince me something shady didn't go down yesterday...somebody hit the jackpot on the shady side rigging the slot machines...just look at the players.

    If you trust your retirement to Lower Manhattan, you gotta be f*ckin' nuts.

    Algorithm, algorithm... (5.00 / 2) (#9)
    by lambert on Fri May 07, 2010 at 09:15:09 AM EST
    Who could ask for anything more?

    All trades that took place between (none / 0) (#1)
    by Inspector Gadget on Thu May 06, 2010 at 08:52:39 PM EST
    certain hours (11:45 AM & ???) of this phenomenon are being reversed. Seems there is the risk that market manipulation was at work and some buyers fell into the incredible good fortune of watching the stocks they bought at the bottom increase some 60% by close of trading.

    Someone on the news tonight said 1 Billion P&G stocks were sold when only 1 Million were supposed to be, and yet another person gave yet another explanation.


    Not really manipulation (none / 0) (#2)
    by abdiel on Thu May 06, 2010 at 09:48:10 PM EST
    but it seems that a contributing factor was that someone made a big mistake and sold off a huge basket of stocks, and the rest of Wall Street scrambled to pick them up. But yes, if you were lucky enough to pick up Accenture stock for 3 cents, that trade is getting busted.

    But someone really screwed up here. Citi is denying involvement and Wall Street's SkyNet didn't become self-aware. Even if it was a 'million-billion' error, you'd have to wonder what the trader thought when smoke was coming out of his computer while it was screaming ARE YOU SURE YOU WANT TO DO THIS.


    The real terror (none / 0) (#3)
    by abdiel on Thu May 06, 2010 at 09:54:18 PM EST
    what if the slide is correct and representative of where the stock exchange should be?

    The "fat finger" explanation should be met with some skepticism, because it means that a trader, his firm, and the stock exchange all dropped the ball on risk controls. It would be the equivalent to a person fighting a parking ticket in court finding themselves on death row because of a typo.

    Are the "Algorhithms" of the Dow ... (none / 0) (#4)
    by cymro on Thu May 06, 2010 at 11:47:44 PM EST
    ... something like the biorhythms of mere humans like us?!

    (The word is "algorithm", but I love your typo :-)

    Earlier in the day, (none / 0) (#7)
    by KeysDan on Fri May 07, 2010 at 08:34:23 AM EST
    some reports had encouraging reports on passage of Senators Sherrod Brown and Ted Kaufman's bill to break-up major Wall Street Banks. Later in the evening, the too big to fail proposal failed in a senate vote, 61 to 23.  What happened during the interregnum?

    all I can say is (none / 0) (#10)
    by Capt Howdy on Fri May 07, 2010 at 09:44:40 AM EST
    thank god my typeos can not effect the stock market.

    Likely story... (5.00 / 1) (#12)
    by kdog on Fri May 07, 2010 at 10:01:39 AM EST
    I want 5% or I'm dropping a dime..."It was Clarence "Capt. Howdy" Beeks officer, he stole all the money"

    Tell you guys this...if the Wall St. casino was held to the same standard as a traditional American casino there would be yellow tape over the doors of the exchange while the gaming commission investigated...there would be no gambling today.


    so YOU say... (none / 0) (#11)
    by jeffinalabama on Fri May 07, 2010 at 09:45:54 AM EST
    what, watching the Machete trailer and accidentally put some extra zeros on there yesterday;-)?

    it funny how hard (none / 0) (#13)
    by Capt Howdy on Fri May 07, 2010 at 10:37:43 AM EST
    they are back peddling on that typeo story.  its like after admitting it they realized how completely f*cking crazy it sounds.

    Forget crazy-sounding... (none / 0) (#14)
    by kdog on Fri May 07, 2010 at 10:49:38 AM EST
    me thinks they realized they needed a better alibi...for the court of public opinion only, they're well aware they have nothing to fear from criminal courts.