May 7 (Bloomberg) -- Mark Watson, an attorney, sold shares of Apple Inc. at 2:47 p.m. yesterday as the Dow Jones Industrial Average had its biggest intraday percentage decline since the market crash of October 1987.
“It just seemed like the end of the world was coming,” said Watson, 37, of Brick Township, New Jersey. “I would not have done it had I known there was some type of a technical error or glitch. Basically, I got screwed.”
Watson said he sold 26 shares of Apple, which he bought for $189 a share in 2007, at $223.99 yesterday. The stock regained value minutes later, closing down 3.8 percent at $246.25.
Nasdaq OMX Group Inc., owner of the exchange where Apple is traded, said it will cancel trades of 296 securities, including stocks and exchange-traded funds, that fell or rose more than 60 percent from their prices at 2:40 p.m. to 3 p.m. New York time, just before U.S. equities plummeted. Apple is not on the list of canceled trades.
The Dow lost as much as 998.50 points, or 9.2 percent, before paring its drop to 347.80 points at the 4 p.m. close of trading yesterday in New York. The Standard & Poor’s 500 Index fell as much as 8.6 percent, its biggest intraday fall since December 2008, before trimming declines to end down 3.2 percent at 1,128.15.
No Technology Issues
Nasdaq said in a statement today there were no trading technology issues. The exchange said the cancellations were done according to its rules and the decision couldn’t be appealed.
Rich Adamonis, spokesman for the New York Stock Exchange, said yesterday “there were a number of erroneous trades” during the plunge. The selloff on concern Europe’s debt crisis will halt the global recovery briefly erased more than $1 trillion in market value.
Regulators including the U.S. Securities and Exchange Commission are reviewing the volatile trading, and Representative Paul Kanjorski, a Pennsylvania Democrat, announced a May 11 hearing to address the causes.
Fidelity Investments, the world’s largest mutual-fund company, has received more calls than normal from customers today, said Vincent Loporchio, a spokesman for the Boston-based firm. TD Ameritrade Holding Corp. has had no systems issues, said Kim Hillyer, a spokesman for the Omaha, Nebraska-based company.
Things have “calmed down a bit” at Charles Schwab. Corp., said Randy Frederick, director of trading at the San Francisco-based company. Active traders may be anxious going into the weekend and that could pressure the market this afternoon, Frederick said.
Vanguard Group Inc., the largest U.S. provider of stock and bond mutual funds, said yesterday’s plunge turned into the biggest trading day of the year in its brokerage business.
“We didn’t see panic,” Tim Buckley, managing director of the retail investor group for the Valley Forge, Pennsylvania-based firm said yesterday. “We saw investors buying.” Buckley declined to specify the number of shares traded. Vanguard has double the average call volume on the brokerage side of its business today, said spokesman Josh Grandy.
Bel Air Investment Advisors bought some large-cap, multinational, blue-chip companies after clients called yesterday wondering what to do as markets plunged, Todd Morgan, senior partner at the Los Angeles-based firm, said yesterday.
‘Good Entry Point’
“It was a good entry point on cash we’ve been sitting on for a long time,” Morgan said. Bel Air oversees $4.5 billion for clients, who have an average of $17 million in investable assets.
“Young investors have to remember that there’s a silver lining when the Dow plummets,” said Christine Fahlund, senior financial planner at Baltimore-based T. Rowe Price Group Inc. “They’re able to buy more shares of their preferred investments.”
Fahlund recommended that retirees stay the course rather than lock-in losses by selling now. If they can’t do that, older investors should consider liquidating only a small portion of their portfolios at a time, meaning 5 percent or 10 percent in a day, she said.
The Dow’s decline helps shake investors’ belief that markets rationally represent value, said Dan Ariely, professor of psychology and behavioral economics at Duke University in Durham, North Carolina.
“The effect of this volatility is that it’s going to be depressing,” Ariely said.
Watson, the investor who sold Apple stock, has put in an order to buy if the shares drop to $195, he said.
“I’m still scared,” he said. “Everything happened so quickly and I tried not to panic but I did.”
To contact the editor responsible for this story: Rick Levinson at firstname.lastname@example.org.