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Wall St. rollercoaster
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| MGT |
"I think the machines just took over."
http://finance.yahoo.com/news/Wall-...184148.html?x=0
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Wall St. rollercoaster: Stocks fall nearly 10 pct
Stocks take record tumble, nearly 10 pct, before regaining some; typo may have caused selloff
Tim Paradis, AP Business Writer, On Thursday May 6, 2010, 11:28 pm EDT
NEW YORK (AP) -- A computerized selloff possibly caused by a simple typographical error triggered one of the most turbulent days in Wall Street history Thursday and sent the Dow Jones industrials to a loss of almost 1,000 points, nearly a tenth of their value, in less than half an hour. It was the biggest drop ever during a trading day.
The Dow recovered two-thirds of the loss before the closing bell, but that was still the biggest point loss since February of last year. The lightning-fast plummet temporarily knocked normally stable stocks such as Procter & Gamble to a tiny fraction of their former value and sent chills down investors' spines.
"Today ... caused me to fall out of my chair at one point. It felt like we lost control," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
No one was sure what happened, other than automated orders were activated by erroneous trades. One possibilility being investigated was that a trader accidentally placed an order to sell $16 billion, instead of $16 million, worth of futures, and that was enough to trigger sell orders across the market.
No one was taking blame, either. The New York Stock Exchange said there was no problem with the Big Board's systems, and all the markets were on a conference call with the Securities and Exchange Commission.
Nasdaq issued a statement two hours after the market closed saying it was canceling trades that were executed between 2:40 p.m. and 3 p.m. that it called clearly erroneous. It did not, however, mention a cause of the plunge.
The NYSE also said it would cancel some trades on its electronic platform.
There were reports that the sudden drop was caused by a trader who mistyped an order to sell a large block of stock. The drop in that stock's price was enough to trigger "sell" orders across the market.
The SEC issued a statement saying regulators are reviewing what happened and "working with the exchanges to take appropriate steps to protect investors."
Whatever started the selloff, automated computer trading intensified the losses. The selling only led to more selling as prices plummeted and traders tried to limit their losses.
"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."
The market was already wobbly because of fears that Greece's debt crisis will undermine the economic recovery. Traders watched television coverage of protests in the streets of Athens, and the Dow was down 200 when the selloff began less than two hours before the closing bell.
Around 2:40 p.m. EDT, the Dow was at 10,460, a loss of 400 points.
It then tumbled 600 points in seven minutes to its low of the day of 9,869, a drop of 9.2 percent.
On the floor of the New York Stock Exchange, stone-faced traders huddled around electronic boards and televisions, silently watching and waiting. Traders' screens were flashing numbers non-stop, with losses shown in solid blocks of red numbers.
Then the market bounced back, about as quickly as it fell. By 3:09 p.m., the Dow had regained 700 points. It then fluctuated sharply until the close. The trading day ended with the Dow down 347.80, or 3.2 percent, at 10,520.
The Dow has lost 631 points, or 5.7 percent, since Tuesday amid worries about Greece. That is the largest three-day percentage drop since March 2009, when the stock market was nearing its bottom following the financial meltdown.
At its lowest Thursday, the Dow was down 998.50 points in its largest point drop ever, eclipsing the 780.87 lost during the course of trading on Oct. 15, 2008, during the height of the financial crisis. The Dow closed that day down 733.08, the biggest closing loss it has ever suffered.
The impact of Thursday's gyrations on some stocks was breathtaking, if brief. Stock in the consulting firm Accenture fell to 4 cents after closing at $42.17 on Wednesday. It recovered to close at $41.09, down just over $1.
Procter & Gamble, generally a stable stock, dropped as much as $23, almost 37 percent, and rallied to close down only $1.41.
Many professional investors and traders use computer program trading to buy and sell orders for large blocks of stocks. The programs use mathematical models that are designed to give a trader the best possible price on shares.
The programs are often set up in advance and allow computers to react instantly to moves in the market. When a stock index drops by a big amount, for example, computers can unleash a torrent of sell orders across the market. They move so fast that prices, and in turn indexes, can plunge at the fast pace seen Thursday.
Even if there were technical issues, concerns about the world economy are running high.
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.
"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 Standard & Poor's 500 index, the index most closely watched by market pros, fell 37.75, or 3.2 percent, to 1,128.15. The Nasdaq composite index lost 82.65, or 3.4 percent, and closed at 2,319.64.
At the market's lows, all three indexes were showing losses for the year. The Dow now shows a gain of 0.9 percent for 2010, while the S&P is up 1.2 percent and the Nasdaq is up 2.2 percent.
At the close, losses were so widespread that just 173 stocks rose on the NYSE, compared to 3,008 that fell. The major indexes were all down more than 3 percent.
Meanwhile, interest rates on Treasurys soared as traders sought the safety of U.S. government debt. The yield on the benchmark 10-year note, which moves opposite its price, fell to 3.4 percent from late Wednesday's 3.54 percent.
Eds: SUBS graf 13 to CORRECT timing of start of selloff to 2:40 p.m. EDT. UPDATES photos. Moving on general news and financial services.
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U.S. stock plunge raises alarm on algo trading
On Thursday May 6, 2010, 8:42 pm EDT
By Matthew Goldstein
NEW YORK (Reuters) - A spine-chilling slide of nearly 1,000 points in the Dow Jones Industrial Average, its biggest intraday points drop ever, led to heightened calls for a crackdown on computer-driven high-frequency trading.
The slide, which in one 10-minute stretch knocked the index down nearly 700 points, may have been triggered by a trading error. Major stock indexes eventually recovered from their 9 percent drops to close down a little more than 3 percent.
But the follow-through selling that pushed stocks of some highly regarded companies into tailspins exacerbated concerns that regulators can quickly lose control of the markets in a world of algorithmic trading.
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.
"The battle of the algorithms -- not understood by nor even remotely transparent to the Securities and Exchange Commission -- simply must be carefully reviewed and placed within a meaningful regulatory framework soon."
Kaufman and Senator Mark Warner -- both Democrats -- said Congress needs to investigate the plunge, which at its deepest point wiped nearly $1 trillion off equity values.
And a House panel has slated a hearing on the causes for the market swoon for next Tuesday, with its chairman, Rep. Paul Kanjorski, urging the SEC to investigate as well.
The scary afternoon in markets came at a bad time for Wall Street, already reeling from accusations that it is a rigged casino -- a criticism stoked by recent civil fraud allegations against Goldman Sachs Group Inc (NYSE:GS - News).
The industry has been trying to stave off the Obama administration's calls for tough financial regulation, and the sell-off came as the Senate turned back a Republican effort to weaken a plan to set up a financial consumer watchdog.
SOME TRADES TO BE Canceled
Lending credence to the sense that the sell-off was exacerbated by technical errors, the Nasdaq stock exchange and NYSE-Arca said they would cancel certain trades that happened during the period in question.
But only trades in stocks that moved 60 percent up or down were covered by the cancellations, leaving some investors with potentially major losses on stocks such as Apple Inc (NasdaqGS:AAPL - News) and Procter & Gamble Co, which suffered lesser, but still significant, declines.
The U.S. Securities and Exchange Commission and Commodity Futures Trading Commission said they were reviewing the unusual activity and working with the exchanges to protect investors.
Citigroup Inc (NYSE:C - News) said it was investigating a rumor that one of its traders entered the trade, a spokesman for the bank said on Thursday. Citigroup, the third-largest U.S. bank, said it has no evidence that an erroneous trade has been made.
Several market participants cited speculation that a trader at Citigroup had erroneously placed an order for at least $16 billion in E-Mini contracts -- stock market index futures contracts that trade on the Chicago Mercantile Exchange's Globex trading platform.
But a source familiar with the situation said Citigroup had traded a total of just $9 billion of the E-Mini contracts, adding that that amounted to less than 3 percent of the $319 billion traded on the E-Mini on Thursday.
CME said the bank's trades in CME index futures appeared normal.
'SCREWED UP'
Earlier, sources told Reuters that the plunge in the Dow Jones Industrial average may have been caused by an erroneous trade entered by a person at a big Wall Street bank.
During the sell-off, Procter & Gamble shares plummeted nearly 37 percent to $39.37 at 2:47 p.m. ET (1847 GMT), 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.
"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."
A vicious market sell-off like Thursday's can be exacerbated when quickly sliding stock prices turn stop loss orders into market orders, meaning shares get sold at any price available.
WIDE SWINGS
NYSE Euronext (NYSE:NYX - News) said it was a safer place to trade than its electronic rivals -- who have been taking market share from it in recent years -- because it deliberately slowed down market making when it realized there was something extraordinary happening.
Triggered by unusual volatility in some stocks, NYSE brought in a "mini circuit-breaker" -- a liquidity refreshment point, or LRP -- to slow trading, which then jumped to other, fully electronic exchanges.
"It validates the decision to offer a hybrid market here where there's a human component married with the electronic," Louis Pastina, executive vice president of NYSE Operations told Reuters in an interview.
The NYSE's rivals advertise lower prices or faster transaction speeds.
The market plunge and especially wide swings in some individual stocks reignited some wider criticism of high-frequency trading, a strategy using lightning-fast computer programs to track market trends.
"We did not know what a stock was worth today, and that is a serious problem," said Joe Saluzzi of Themis Trading in New Jersey, a frequent critic of computer-driven high frequency trading.
Investors had already been on edge throughout the trading day after the European Central Bank did not discuss the outright purchase of European sovereign debt as some hoped they would to calm markets.
While the exchanges' move to cancel some of the most suspect trades may mollify some, there remained more questions than answers about the market's wild afternoon.
"The trouble is the exchanges aren't saying what caused the erroneous trade," said James Angel, a professor at Georgetown University's McDonough School of Business who specializes in market structure. "What they are saying is that it's not my fault, it was somebody else's fault."
(Additional reporting by Dan Wilchins, Roberta Rampton, Ann Saphir, Deepa Seetharaman, Phil Wahba and Maria Aspan; Writing by Christian Plumb; Editing by Gary Hill)
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http://finance.yahoo.com/news/US-st...553092.html?x=0 |
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| Joss Weatherby |
| PROTIP B != M WHEN SELLING SHARES OF P&G! |
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| butterfly |
| can someone post a summary? |
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| Sushipunk |
| quote: | Originally posted by butterfly
can someone post a summary? |
+1
Been busy and have no idea what's going on :haha: |
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| ziptnf |
| quote: | Originally posted by butterfly
can someone post a summary? |
Europe is broke. |
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| butterfly |
| quote: | Originally posted by ziptnf
Europe is broke. |
maybe i will be able to afford to travel there then. when i was there last winter it was way too expensive. |
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| Comrade Stalin |
| quote: | Originally posted by butterfly
can someone post a summary? |
A trader's error in placing an order, like 1 billion shares instead of 1 million, caused a precipitous drop in the market, exacerbated by computerized automatic trading systems that sell when a certain price is reached to prevent further loss (called stop loss). Like an avalanche or stampede the selling becomes a route. The good thing though is, it wasn't caused by some horrible event, or by mass human psychology. Rather, computers are to blame, lazy humans...Though the 3% drop is justified because of the European debt crisis. But 1000 points in a day on the Dow Jones? That was a glitch if I ever saw one. Which is the reason several exchanges are cancelling a huge number of trades placed in the 2 o'clock hour of that day. |
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| Moongoose |
| I heard BID went from cca 33$/s to 100.000%/s for a couple of minutes...damn if you managed to unload some of those in that time and then have the trades cancelled...you would be pretty pissed :D |
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| Meat187 |
I thought it was because Krypton and Yukii broke up and Krypton sold all his stocks in anger.  |
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| rulzz |
that was no error, a smaller event like this happened on feb 27,2007 it was a 150 point drop in a few seconds.
Media screams trader's error every time there is big drop, i've seen them saying it after big drops in Corn, Gold, S&P Futures and equity markets everytime there is big drop. Its not an error and exchanges confirmed that there were no errors (NYSE,CME, NASDAQ issued statements). Somebody sold a large lot consciously, and quants followed below.
One trade could not move market and currencies like this unless it was an engineered trade coming from one place.
Yesterday somebody wanted out, and out quickly and in the open (no dark pools involved here). |
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| Comrade Stalin |
| Cramer has been touting his observation of P&G (PG) all day on CNBC. It went from the $60's to $47 in less than 1 minute and right back up just as fast. |
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| Marcus Summers |
| I bet the jews did this. |
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