Dow Drama – Wall Street Goes Insane

The lead article in today’s New York Times, titled “Dow Falls 1,000, Then Rebounds, Shaking Market,” describes a crazy day on Wall Street when the index fell dramatically then rebounded just as quickly. Part of the error, though the exact cause is still unknown, seems to have been traced to a mistyped sell order for a billion instead of a million. This cascaded into automated trading systems and led to a large sell off.

However, the index did finally close down 300 points or about 3 percent. And that was based on real worries regarding the situation in Greece, a country Germany will be reluctantly bailing out today if their legislature approves it. Rioting by Greeks in the face of austerity measures didn’t help the situation either.

At one point during the day, described as resembling the Twilight Zone by one trader, blue-chip stocks such as Procter & Gamble and Accenture fell by as much as 90 percent. Timothy Geithner, the Fed and European Central Banks held emergency conference calls.

All this economic lunacy just heightens the need and immediacy of financial regulation. While the markets are widely acknowledged as superior to the government in setting prices and controlling general economic activity, the article concludes by noting their need for “adult supervision.”

Hopefully, today’s trading will be less frenetic, and the factors leading to these wild gyrations will be better understood, and prevented.