Wall Street’s big plunge – excuses and explanations
A 1000-point plunge in the blue chip Dow Jones Industrial Average in just a few minutes has left traders and stock exchange officials searching for reasons.
The best explanation is that a wrong price for a single stock triggered a selloff in other stocks by computerised trading systems.
Regulators and exchanges are holding inquiries, and it’s likely many trades during a 20-minute period will be cancelled.
"It was absolute chaos," sharebroker Steven Starker told the Wall Street Journal. He said trading in the volatile period between 2.40pm and 3pm reminded him of the selloff during the market crash in October 1987.
Representatives of major US exchanges and the Securities and Exchange Commission have held late night meetings to examine potentially erroneous trades in multiple stocks.
Nasdaq officials said any trades that were 60% away from the market price at 2:40 pm would be cancelled.
About 300 stocks are expected to see cancelled trades, but it is unknown how many trades would be broken. No exchange has admitted it had seen trades mis-keyed into their systems, one exchange official said.
The plunge added to an already jittery market affected by Europe’s spreading debt crisis. The Dow was actually slightly ahead when the plunge started, resulting in a 1010-point turnaround.
At the close, the Dow was down 347.80 points, or 3.2% to 10,520.32, the third down day in a row. Other indexes were also down in one of the worst days for shares this year.
The S&P 500 index finished 3.2% down at 1128.15, while the Nasdaq Composite was down 3.4% at 2319.64.