Investors are looking to this morning’s opening on Wall Street to learn whether Thursday’s record plunge was a fluke or something more.
Panicked selling sent the U.S. stock market into a freefall Thursday afternoon, when program trading by high-frequency traders kicked in, according to Market Watch, a service of the Wall Street Journal.
RV stocks felt the wild trading with leading stocks closing lower but not in dramatic fashion.
- Winnebago Industries Inc. closed at $14.53, down 88 cents or 5.71%. It fell as low as $13.06 a share during the day.
- Thor Industries Inc. closed at $33.90, down 47 cents or 1.4% on volume of 1,007200, nearly twice its normal trading volume.
- Drew Industries Inc. closed at $21.65, down 80 cents or 3.7% on volume of 238,400 shares.
At its lows, the Dow Jones Industrial Average was down 998.50 points, which ranks as its biggest intraday drop in its history, at least on a points basis. It finished down 347.80 points, or 3.2%, at 10520.32 amid declines in all 30 of its components. The drop was the worst in point terms since February 2009 and the worst in percentage terms since April 2010.
The selling accelerated after a sharp drop in shares of Procter & Gamble (PG 61.31, +0.56, +0.92%) and at least one other DJIA stock, 3M Co. (MMM 83.54, -0.70, -0.83%) , market watchers said.
The Securities and Exchange Commission and the Commodity Futures Trading Commission issued a joint statement late Thursday, saying they were working with exchanges and other regulators to review the session’s “unusual trading activity.”
“We will make public the findings of our review along with recommendations for appropriate action,” agency officials said in a statement.
Shares of Procter & Gamble plunged to $39.37 at one point from around $60. The New York Stock Exchange said each stock has its own circuit-breaker level. When these stocks fall below their levels, then they can be traded on any other exchange or platform at any price. When P&G fell below its circuit breaker, a bid came in for the stock at $39.37 from the Nasdaq, the NYSE said.
“You don’t see a blue-chip stock like this go down 20 points with no news,” said Frank Ingarra, co-portfolio manager at Hennessy Funds, a quantitative firm that deals with program traders. “All of the algorithms kicked in from this errant thing.”
The Big Board also saw 3M fell below its circuit-breaker level.
Several market watchers said they heard a major firm may have accidentally released an errant program trade using e-mini contracts, which are traded at the Chicago Mercantile Exchange. A spokeswoman for the CME said its markets “functioned properly without issue.”
Traders also noted unusual trades among exchange-traded funds, including the iShares Russell 1000 Value Index Fund (IWD), which dropped from close to $60.00 to 7.5 cents.
“These ETFs traded to lows that are not mathematically correct,” he said.
While most quantitative-driven programs would normally try and take advantage of market aberrations like Thursday’s violent drop, it is murky whether program trades were more involved in driving the market down or helping push it back up.
“It’s very hard to tell whether the initial trades caused others to follow suit and jump in, thinking this was a true market move,” said Adam Allam, managing director at Instinet, which executes program trades on behalf of its clients. “Everyone at this point’s just guessing or trying to justify why that move happened and it’s quite plausible it was an error.”
Traders leaving for the day faced a growing media horde waiting for them. They described the session as “roller-coaster,” “madness” and just plain “crazy.”
One trader who has been on the floor for more than 20 years said he’d never seen it like Thursday.
“We were just watching the trades go through, and nothing was getting down to us on the floor,” he said. “We were blindsided.”
Others said there was an eerie calmness to the ride.
“It was kind of somber,” one said. “It wasn’t as crazy as you’d expect.”