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Engadget Post Drops Apple Market Cap by $4 Billion in 6 Minutes

Engadget posted some information about a supposed delay of Apple’s iPhone and almost immediately the floor fell out on Apple’s stock. Massive selling took the stock from $107.89 to $103.42 in six minutes. That means roughly $4 billion in market cap was erased in a few minutes from a single paragraph of a blog post! Of course it was quickly fixed and the stock bounced right back. I just thought it was interesting to see how quickly this kind of thing can happen.

[The original Engadget post (now edited) | Apple Stock on Google Finance]

$1-trillion erased from the value of global equities on Tuesday

According to Bloomberg potential ‘overheating in China’ lead to about $1-trillion (USD) erased from the value of global equities on Tuesday! The worst one day sell off since 9/11. Wow.

I thought the moment when the computer algorithms started to kick in (around 2.59 pm) was particularly of interest. Many firms have orders queued up in case of downward trending so people don’t lose their shirt. Of course these orders probably trigger more programs to queue up even more orders.

Its fascinating to me that these computer algorithms (used by hedge funds to hide their activity) can have such a major effect on the behaviour of other computer algorithms! Not to mention what happens with computer glitches. I’m not sure how all that works but it was a fascinating day on the market.

Forbes on this

Update:

Here is a graphic from the New York Times illustrates this:

Stocks Feb 2007

New York Times backstory audio on this. Audio mirrored here.