NEW YORK – Tuesday's sell-off was dramatic by any measure. But in the case of the Dow Jones industrial average, it may have been exacerbated by mechanical problems.
According to the Wall Street Journal, a backlog of information caused a glitch which led to the index's precipitous decline in mid-afternoon.
“The system fell behind,” Mike Petronella told the paper. Petronella is president of the Dow Jones Indexes.
The Dow, the Nasdaq Composite Index and the Standard & Poor’s 500-stock index were all in the same negative company throughout much of the day, but the S&P 500 and the Nasdaq began to fall further in the afternoon, while the Dow stayed roughly 200 points down.
That all changed at about 3 p.m. EST, when the Dow plunged more than 200 points in a matter of minutes. In essence, that was catchup.
That's because at around 2 p.m. EST the team that compiles the Dow noticed the system was becoming overwhelmed and a data backlog ensued. After the team switched to a backup computer system, the data caught up, sending the Dow down more than 200 points to its lows for the day, about 545 points below the open.
According to the Journal, the glitch also affected the roughly 400 real-time indexes of the Dow Jones Industrial Average.
The backlash caused traders to convert to dry-erase boards, using stock symbols accompanied by the letter “S” for “sell.” Some traders also stayed after market close to calculate numbers using pen and paper.