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By Jason Stipp | 05-06-2010 03:12 PM

Our Read on Thursday's Roller-Coaster Market

No matter what caused Thursday's brief, sharp tumble, real fears were stoked in the market, but investors should take a breath before hitting the 'sell' button.

Jason Stipp: I'm Jason Stipp for Morningstar. The markets took investors on a gut-wrenching wild roller-coaster ride on Thursday, with the Dow dropping as much as 900 points before recovering a little bit. Here with me to talk about what may have caused this, and why there still might be some legitimate fears in the market, is Morningstar markets editor Jeremy Glaser.

Jeremy Glaser: Thanks, Jason. I usually like roller coasters, but would prefer not to have ridden this one.

Stipp: Absolutely, I think you and a lot of other people. So I think that they're still sorting through what happened in the market today, but there are some theories out there that it might not have been all fundamentals. What are people saying?

Glaser: Yes. First off, we absolutely have no idea exactly why the Dow ended up plunging 900 points, but some theories have to do with technical trading glitches. That there seems that Procter & Gamble, in particular, had some very odd pricing. That it was traded over $60, and then, suddenly, was below $40, which just isn't...

Stipp: For a company like that, a consumer staples company, that doesn't happen. There's no reason that its value would change that much.

Glaser: There was nothing fundamental that would make Procter & Gamble worth that much less. So it's possible that there was a technical issue there, and that could have set off a cascading effect of the high frequency trading. A lot of the program trading that feeds on that, it sees that big of a move, and it goes ahead and makes its own move.

And we saw very quickly, the market rebound several hundred points. It's still down pretty substantially. But we saw, once humans got in front of it, they were able to put some money back in. I think we'll probably hear more about this in the coming days, but that first take, that seems like a reasonable explanation.

Stipp: Sure. Now, it seems like there are still some fears out there, and they may have been stoked by whatever caused this big drop. It seems like it did stoke some real fears there. The market is down more than it was this morning, when it sort of stabilized in the 1%-2% [loss] range. So what do you think is still lingering in investors' minds that may have just been riled up by whatever this massive drop was today?

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