TOPICS > Economy

U.S. Stocks Tumble Over Weakening Euro, Jobless Claims

May 20, 2010 at 12:00 AM EDT
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JEFFREY BROWN: Wall Street went down hard today. Deepening doubts about Europe financial stability and new concerns about the U.S. recovery hit all of the major indexes.

The Dow Jones industrial average lost 376 points to close at 10068, its biggest one-day drop since February of last year. The Nasdaq fell 94 points to close at 2204. The Standard & Poor’s 500 is now down more than 10 percent from its high last month, signaling a market correction.

All of this came two weeks after the so-called flash crash that shook Wall Street earlier this month. That episode was the subject of a Senate hearing today.

It was 2:30 in the afternoon on May 6, and the Dow Jones industrial average was trading above 10800. Then, without warning, it went into meltdown, a dizzying dive of nearly 1,000 points in less than 30 minutes, before snapping partway back.

MAN: Good morning, everyone.

JEFFREY BROWN: At today’s hearing, the heads of major regulatory agencies said they still don’t know exactly why it happened.

Mary Schapiro is chair of the Securities and Exchange Commission.

MARY SCHAPIRO, chair, Securities and Exchange Commission: It’s been two weeks. Our staffs have been working around the clock. But there is an extraordinary amount of data that we — we have to plow through. We had 19 billion shares traded that day and 66 million different trades. Seventeen million of them alone were between 2:00 and 3:00. So, the enormous amount of data coming from multiple sources in different formats, captured in different ways, is — is creating an enormous amount of work for us.

JEFFREY BROWN: Also under the microscope today, the 21,000 trades that were canceled by exchanges on May 6. They were determined to be erroneous.

But Kentucky Republican Jim Bunning noted that many traders had to live with their losses.

SEN. JIM BUNNING, R-Ky.: I am very concerned that trades were canceled on an arbitrary basis, very concerned. That is unfair, undermines market discipline, and is nothing more than a bailout of sellers who would have faced losses from their own decisions to use market orders.

JEFFREY BROWN: As they pursue the answers to May 6, the SEC and the major exchanges have already announced a new circuit breaker plan. It would halt trading on individual stocks during periods of high volatility.

The Standard & Poor’s 500 index will be first to use the pilot program. If any stock in the index rises or falls 10 percent or more within a five-minute period, trading in that stock will be stopped for five minutes. The rules will apply to price swings that occur between 9:45 a.m. and 3:35 p.m., almost all of the trading day.

But going forward, the SEC’s Schapiro said exchanges must also enact clear rules for traders caught in major sell-offs.

MARY SCHAPIRO: We need a process that is much more transparent, provides certainty in advance about what trades will be broken and which ones won’t, and creates fairness for investors.

JEFFREY BROWN: Exchange executives said they plan to meet with SEC officials next week to discuss new standards.