On Thursday, the Dow Jone plunged nearly 1000 points in mid afternoon trading. Going into yesterday's trading session, global markets were already jittery due tot he Sovereign Debt situation in Greece (see previous post). Shares we trading lower during the early afternoon due to these concerns, but without any apparent trigger at approximately 2:45pm EST Proctor and Gamble's stock fell 10% to $56 on the New York Stock Exchange (the NYSE sets prices on which all other stock markets work from). This triggered a "circuit breaker" which slowed the trading of the stock for less than a minute. During that time other stock exchanges were allowed to trade the stock on their own without getting the price from the NYSE. According to Proctor and Gamble and the NYSE, the NASDAQ stock exchange may have may have misprinted a quote of $39.37 per share. It is also possible that the electronic trades actually occurred (trader may have incorrectly entered an inflated sell number - 1 billion instead of 1 million) but were made in error.
Other companies like Apple and Accenture were also affected as automated trading took over. Due to the irregular stock prices and trading patterns, the NASDAQ said all trades executed between 2:00 and 3:00 p.m. ET greater than or less than 60% of the stock price as of 2:40 p.m. ET or immediately prior to that time will be cancelled. The SEC said they "are working closely with the other financial regulators, as well as the exchanges, to review the unusual trading activity that took place briefly this afternoon. We are also working with the exchanges to take appropriate steps to protect investors pursuant to market rules."
By the end of the day the market returned to levels before the sharp sell off began. While many retail investors were not aware of this activity it underscores the importance of maintaining a disciplined approach to your investment strategy and the need to focus on the fundamentals in the market and the economy where the indicators have been pointing in the direction of continued recovery. This morning Canada announced 108,000 jobs were created in April (4 times more than expected) and the unemployment rate fell to 8.1%. The issues that happened yesterday will be investigated and corrected like in the past.
Source: The Globe and Mail, CNN Money
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