Yowza! Market Drops Precipitiously For No Apparent Reason

October 11, 2007 at 12:21 pm  ·  Category: Market Commentary

The market had been trading up strongly today and then, all of a sudden, for no apparent reason, about an hour and a half ago, around 1:45am EST, it started to drop precipitously (Intraday Chart). 

As you can see from the chart, the S&P dropped about 18 points (1.14%) in the 45 minutes from 1:45pm EST to 2:30pm EST.

I’ve been trying to figure out why but nobody really seems to know.

David Gaffen of the WSJ’s MarketBeat blog says it might be due to a reduction in a revenue estimate for the coming quarter for Baidu.com (BIDU) by JP Morgan.  As you can see from this chart of Baidu (Intraday Chart), the stock started selling off on heavy volume at about 1:15pm EST.

The stock has continued to selloff on heavy volume.  It’s currently around $304 from $358 before the JP Morgan revenue cut – that’s down 15% in 2 hours!

Baidu is one of the most speculative stocks in the market and it looks like investors are trampling each other to the exit.  This is ugly.

UPDATE (Thu 10/11, 12:30pm): Briefing.com attributes the selloff to European inflation warnings by a European Central Bank Council member.

This strikes me as ridiculous and almost certainly wrong. 

The Baidu.com (BIDU) explanation, involving a heavily followed speculative stock strikes me as much more likely.  That explanation strikes me as being highly credible right now.

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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