(Bloomberg) -- The plunge in U.S. stocks just after 3 p.m. went beyond a normal reaction to economic circumstances and had elements of a liquidity-driven selloff like the one that landed on markets in May 2010, an analyst said.
“We can officially call the last 20ish minutes a flash crash,” said Dennis Debusschere, head of portfolio strategy at Evercore ISI. Loosely defined, the term “flash crash” denotes a phenomenon in electronic markets in which the withdrawal of stock orders rapidly exacerbates price declines.
“This appears like a good old fashioned ‘buyers strike,'” he said. “Probably another terrible day for risk parity as yields are down, but not offsetting the equity carnage at all.”
At its worst level at 3:10 p.m. in New York the point loss in the Dow Jones Industrial Average -- 1,597.08 -- was greater than on May 6, 2010, the day of the original flash crash when the Dow's decline was just short of 1,000 points. Today's percentage decline topped out at 6.3 percent, compared with 9.2 percent in the 2010 event, which spurred the creation of a series of safeguards meant to prevent a repeat.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net.
To contact the editors responsible for this story: Chris Nagi at chrisnagi@bloomberg.net, Nick Baker
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