Stocks slip after wild day; Europe woes linger
5/7/2010NEW YORK — Stocks moved lower in morning trading Friday, a day after one of the most turbulent days in the market's history.
A strong report on jobs reassured investors that the economy is recovering, however.
The Labor Department reported that employers added 290,000 jobs last month, far more than expected and the biggest jump in four years. However the jobless rate rose to 9.9 percent from 9.7 percent as more people looked for work.
The return of relative order to trading was a welcome relief after the market swung wildly the previous day. A computerized sell-off, which might have been triggered by a simple typographical error, sent the Dow Jones industrial average down by a record of nearly 1,000 points in about 30 minutes Thursday afternoon. The market started to steady itself and regained two-thirds of that loss before the end of trading.
Europe's debt crisis and fears that it would spread has been hanging over the market this week, sending stocks sharply lower. The Dow's drop of 631 points Tuesday through Thursday was its worst three-day point decline since November 2008.
The big improvement in the jobs report brought some clarity to the biggest question remaining for the U.S. economy: When employers would start hiring again. Despite positive signs in manufacturing and housing, job creation has been lagging far behind other sectors of the economy, a worrisome point for economists. Friday's report may help change that perception.
“It's a good-size number and it had a lot of breadth,” said John Silvia, chief economist at Wells Fargo. “There isn't a double-dip out there. The employment situation suggests that we have a sustained economic recovery in the U.S. Companies are hiring people.”
In Europe, there was more progress toward freeing up a package of bailout loans for Greece. Germany's parliament approved Berlin's share of the rescue package after a boisterous debate. Germany is the largest contributor to the aid package and had been hesitant to sign off on the deal until Athens agreed to deeper cuts in spending.
In morning trading the Dow Jones industrial average was off 48.29, or 0.5 percent, to 10,472.03 The Standard & Poor's 500 index fell 7.03, or 0.6 percent, to 1,121.12, while the Nasdaq composite fell 26.11, or 1.1 percent, to 2,293.53.
Falling stocks outpaced gaining ones by about three to two on the New York Stock Exchange, where volume was 300 million shares.
/AP-CS-05-07-10 1019EDT
The story as it appeared in earlier editions of The Blade and toledoblade.com:
NEW YORK TIMES
NEW YORK - A bad day in the stock market turned into one of the most terrifying moments in Wall Street history yesterday with a brief, 1,000-point plunge that recalled the panic of 2008.
It lasted just 16 minutes but left Wall Street experts and ordinary investors alike struggling to come to grips with what had happened - and fearful of where the markets might go from here.
At least part of the sell-off appeared to be linked to trader error, perhaps an incorrect order routed through one of the nation's exchanges. Many of those trades may be reversed so investors do not lose money on questionable transactions.
But the speed and scale of the plunge - it was the largest intraday decline on record - seemed to feed fears that the financial troubles gripping Europe were at last reaching across the Atlantic.
Traders and Washington policy makers struggled to keep up as the Dow Jones industrial average fell 1,000 points shortly after 2:30 p.m. and then mostly rebounded in a matter of minutes. For a moment, the sell-off seemed to overwhelm computer and human systems alike. Some traders began referring grimly to the day as "Black Thursday."
But in the end, yesterday was not as black as it had seemed. After briefly sinking below 10,000, the Dow ended down 347.80, or 3.2 percent, at 10,520.32. The Standard & Poor's 500-stock index dropped 37.75 points, or 3.24 percent, to close at 1,128.15, and the Nasdaq was down 82.65 points, or 3.44 percent, at 2,319.64.
But up and down Wall Street, and across the nation, many investors were dumbstruck. Experts groped for explanations as blue-chip stocks like Procter & Gamble, Philip Morris, and Accenture plunged. The shares of Accenture, a consulting firm, fell from $40 to a single penny and then rose back to $40 again.
Procter & Gamble traded at $54 on the New York Stock Exchange. But at the same time, Nasdaq was reporting that the company's shares were selling for $39.
The crisis in Greece, high-speed computer program trading, the debate over regulatory reform in Washington, talk of errant trades - all were pointed to as possible catalysts. But most agreed the plunge would not have been nearly as bad if the markets had not been on edge already over the debt crisis in Europe.
Treasury Secretary Timothy Geithner was returning from testifying at the Capitol and at about 2 p.m. looked down at his Blackberry and saw that the market was down 3 percent. He called officials in the Treasury's "market room," which constantly monitors financial exchanges; they guessed that the cause was Greece's and Europe's financial woes.
Minutes later in the Treasury hallway, Mr. Geithner looked again at his Blackberry and saw the market was down nearly 9 percent. He told colleagues it had to be a mistake.
He immediately called officials in the market room and then the Federal Reserve. He, Fed officials, and Mary Shapiro, the chairman of the Securities and Exchange Commission, held a conference call at about 3:15 and Mr. Geithner walked over to the Oval Office to brief President Obama and other top officials.
As of about 6 p.m., all the officials knew was that there was what one official called "a huge, anomalous, unexplained surge in selling, it looks like in Chicago, at about 2:45." The source remained unknown, but it apparently triggered trading strategies that pushed trading out of whack until it started to reverse.
Federal officials fielded rumors that the culprit was a single stock, a single institution or execution system, a $16 billion trade that should have been $16 million. But they did not know the truth.
Two hours after the market closed, Nasdaq issued a statement saying it was canceling trades that were executed between 2:40 p.m. and 3 p.m. that it called clearly erroneous. It did not, however, mention a cause of the plunge.
In Greece yesterday, lawmakers approved drastic cuts needed to secure international rescue loans worth $140 billion and police fired tear gas to repel stone-throwing protesters after the vote.
The new clashes occurred a day after violent protests left three people dead after a bank was firebombed in Athens.
Greek lawmakers voted 172-121 to approve the austerity measures - worth about $38.18 billion through 2012 - that will slash pensions and civil servants' pay and further hike consumer taxes.
The rescue loans are aimed at containing the debt crisis and keeping Greece's troubles from spreading to other countries. The money will come from the International Monetary Fund and the 15 other governments whose countries use the euro.
Associated Press and Washington Post contributed to this report.