P&G Stock Down By 20%, Accenture Hits 1 Cent: Computer Glitch?

by NowPublic Staff | May 6, 2010 at 12:24 pm

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Stock Market Today: Why did the Proctor and Gamble (P&G) stock price drop?

In a was a crazy ride for the NYSE and Dow Jones today, Proctor and Gamble (P&G) stock dropped suddenly by 20% in almost 5 minutes fueling a massive drop in the Dow Jones which was down 900 points before recovering to close down 505 points.

Some of the losses were fueled by technical glitches and computer trading

Computer trading intensified the losses as programs designed to sell stocks at a specified level kicked in. Traders use those programs to try to limit their losses when the market is falling. And the selling only led to more selling as prices fell.

"I think the machines just took over. There's not a lot of human interaction," said Charlie Smith, chief investment officer at Fort Pitt Capital Group. "We've known that automated trading can run away from you, and I think that's what we saw happen today."

Proctor and Gamble helped to fuel the roller coaster ride for them markets because an apparent computer glitch on the NASDAQ caused PG stock to plunge.

P&G was one of the biggest, sudden decliners, falling 4%, then suddenly plummeting 20% -- an inconceivable price drop for a stock as stable as P&G. The stock with 30 minutes left in the trading day, was back at $60.58, down 2.5%.

Besides Proctor and Gamble another stock price that was up and down was Accenture. At one point the stock price of Accenture fell down to 4 cents. It closed on Wednesday at $42.17 before closing around $41 on Thursday.

In addition, their were overall nervousness surround news out of Greece. The Greek economy, the protesters responding to the austerity measures, and the chance Spain and Portugal cold be hit next all pushed to the markets down on Thursday.

The Atlantic has good round up of the factors that could have contributed to markets sudden down turn on Thursday.

It was the computers, stupid. This seems likely to have been at least part of the problem; the drop was just too sudden, as was the recovery. Accenture dropped from $40 a share to one cent at some point, and Proctor and Gamble also had an improbably gigantic drop. I'd guess that some trading programs, somewhere, hit the wrong stock price level and went horribly wrong.

The market knows something that we don't about Germany. Now that Greece has passed its austerity plan, the rest of the eurozone has to go along. Germany, the single biggest player, votes tomorrow, and maybe someone knows we're headed for a nasty surprise.

The market knows something that we don't, but ought to, about Greece. Greek approval of the austerity plan should have perked things up. Instead, the markets are in turmoil. And maybe they're right to be. Passing an austerity plan doesn't guarantee that it will work; Argentina was going through governments like paper plates right before it terminated the dollar peg and defaulted.