Wall Street Still Baffled by Yesterday's Stock Plunge
Investors are likely to be a little nervous with today's opening bell. Yesterday the Dow lost 347 points (3.2%) and this was actually good news, because earlier in the day the Dow was down nearly 1,000 points, over 9%. MarketWatch calls it a 900-point earthquake. During the incredibly volatile 20 minutes the Dow was down 992 points before climbing back up about 600 points. Some stocks suddenly became penny stocks. At one point in time the shares of Boston Beer Co. were trading for just one cent. What is really disconcerting about yesterday's events is that Wall Street still can not explain what happened. It seems like a glitch, but Wall Street can't find the glitch. The Wall Street Journal is reporting that Wall Street is still baffled by what happened yesterday.
The Securities and Exchange Commission and the Commodity Futures Trading Commission said they were working with other regulators to review "unusual trading activity." The major U.S. stock exchanges said they were looking for trading glitches and examining potentially erroneous trades in multiple stocks. Major exchanges said they will cancel erroneous trades that occurred during the selloff.
Multiple stocks, ranging from Accenture PLC to Boston Beer Co., momentarily lost nearly 100% of their value, changing hands for just one penny. Exchange-traded funds, which are index funds that trade like stocks on exchanges, were also temporarily vaporized. The $9.5 billion iShares Russell 1000 Value Index Fund went from $59 to around 8 cents in the blink of an eye.
"It happened so quickly, it was like a torpedo," said Scott Redler, chief strategic officer at T3 Capital Management, a hedge fund. "It was mayhem."
Hopefully, today's trading will be smooth and there will be no wild swings like what occurred yesterday. Even without bizarre market glitches, the stock markets have been trending down. Concern over the falling Euro and the financial crisis in Greece have roiled the markets the past few days. Falling stock prices threaten to end the increased luxury spending that we have seen the last couple quarters. If stocks continue to fall and uncertainty returns then wealthy consumers may decide to tighten up once again.
