Stock market crashes, bounces back in the same day

Dow Jones stock chart showing Thursday's drop and bounce

On Thursday, the stock market in the U.S. crashed led by the Dow which lost almost 1,000 points due to a number of reasons, but then climbed back and ended the day losing “only” 347.80 points. It appears that the main reason for the drop was a computer glitch that showed some shares go down to almost zero.

Proctor & Gamble (P&G), one of the world’s largest companies may have been the trigger for this enormous sell-off. Apparently, someone wanted to sell 16 million shares of the company (which isn’t as much as it sounds since the company has almost 3 billion shares), however, the person charged with punching in the numbers accidentally added a couple extra zeros and that drove the stock to lose about 1/3 of its value before it recovered. Since then, it has been reported that some trades that took place in the 20 minute window would be cancelled as the information out there was not accurate.

The second major reason for the sell-off today was because the Greek government passed an austerity budget which basically means that they will be making cuts and raising taxes because they feel that their debt situation is unsustainable. This led to riots in the streets of Athens and a greater worry that Greece and other European countries with high debt levels may end up defaulting or needing the EU to bail them out. The biggest economy that concerns investors in the immediate future is Spain as they have high debt levels and are among the largest economies in the world. If Spain will end up requiring a bail out of some sort, that can cause Europe and thus, the world to enter another recession.

In the longer term, the same concerns will be surrounding Italy as they also have some debt worries and are a major world economy. Greece, which has been in the news a lot recently, is a concern but because they have a relatively small population and economy, there is doubt as to whether they alone can cause the U.S. or even Europe to enter recession once again. The reason they have most of the attention is because they are going through the problem right now as we speak. Next in line will likely be Portugal and Spain. However, Portugal’s economy is even smaller than Greece’s so, even if they will need the EU to bail them out, it shouldn’t be too difficult for them to do so.

Spain on the other hand, is among the 15 largest economies and has over 40 million people. For the EU to bail out a trillion dollar economy may prove to be a very tough challenge. It is unclear how or even if they can do something like that alone. With that said, right now Spain is saying that their financial troubles have been exaggerated and they are not in as bad a shape as the media has been saying. Hopefully this is true because it can get ugly if they have problems similar to Greece’s.

Thursday was one of the strangest days in Wall Street history and will likely be referenced for many years to come as such. Also, there is a good chance that the person who has been accused of having “fat fingers” which led him to punch some extra zeros will either become famous or live in infamy.