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.”

Source: news.yahoo.com

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%.

Source: thestreet.com

• 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.

Source: theatlantic.com