Misplaced Finger Crashes Stock Market?
Thursday, May 6, the U.S. stock market plunged 1,000 points in eight minutes, one of the biggest dives in history. Read those points as more than $1 trillion dollars in market value gone poof. By the end of the trading day, the market bounced back, closing 348 points down, but oh, the drama! The chaos, the calls for antacids and Xanax as one "misplaced finger" almost hurled the world into a major money crisis. Financial death by typo.
At The Week, a staff writer gives five theories of what may have caused the crash. One of those is the "the Greek riots." The list also includes the typo theory, a possible computer glitch, unscrupulous traders, and cyber-terrorism.
As we learn in the Russia Today video, Alec Young, an equities analyst with Standard and Poor's says "markets are increasingly concerned about the viability of the Euro." However, looking at a far less dramatic market drop earlier this week, one could conclude the 1,000-plus dip of May 6 was about more than Europe's finances.
RT's own analyst Mark Gay lists reasons similar to those in The Week. He says U.S. analysts had already indicated the market was reacting to the problems in Greece and the perception that European leaders were not acting quickly enough to resolve that situation, and then came the crash that felt like 2008 all over again:
They were already nervous. The market was already down 250 points, and then it seems there was either a trading glitch, what they call "a misplaced finger," someone pressing the wrong button. The sell-off started, accentuated by these computer trading programs, which can sell shares in a split second.
So, you saw the market go down, from 250 down down to minus 1,000, the biggest one-day fall the market's seen. Now that may have been technical, but I don't think that's the whole story. The nervousness of the market was evident. People thought this was back to 2008, they thought this was another major sell-off, and the proof of that is that the volumes were almost twice the normal daily volumes. Very high-volume of selling, and very broad-based. Not just a few key stocks like those ones we heard evidently in some kind of mishap fell to zero.
One stock that headed to zero was giant Procter & Gamble. CNBC posted video of its financial analyst Jim Cramer noticing P&G's drop.
CNBC reports further that the glitch may have originated at CitiGroup. Its management seeks answers. So do federal regulators. The AP reports that President Obama has "authorities investigating wild market swing."
More on the Market:
- 20-minute panic plunge stuns Wall Street by Francine Knowles and David Roeder
- Peter Siris: "A Lesson in Fear as all hell breaks loose ..."
- Reuters, "Plunge highlights fragmented markets, fast traders"