By SIMON CONSTABLE
On May 6, 2010, something so strange happened in the stock market that it puzzled exceptionally experienced traders. Without warning, stock prices went into free fall at 2:42 p.m. ET. Within minutes, the Dow had fallen 998.50 points, then its biggest intraday point drop in history. Much of the drop reversed but the market closed down .
Some stocks, such as Accenture and Boston Beer, fell by as much as 100% for just a moment before rebounding. The normally ultrasteady Procter & Gamble fell by 35% in two minutes.
The plunge quickly became known as the “flash crash.” The question: What caused this?
There’s the fat-finger theory — someone accidentally making a huge stock order, triggering computer-operated algorithms to sell. “The algos didn’t precipitate it, but they contributed,” says Sam Stovall, CFRA’s head of U.S. equity strategy.
Another factor could have been the halt in trading by some algo companies and the political tension on the streets of Greece, was yet another idea. “Televisions showed images of standoffs between Greek police and protesters,” The Wall Street Journal reported. Read more here.
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