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What Really Caused the Plunge: The Gossip Kids Are Thinking Butterflies

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With nobody quite sure as to what happened yesterday—was it a ‘Glitch’? Two? Ten? Elves? Ben Bernanke, a couple of Quaaludes and a voodoo doll?—we figured it would be best to turn to a media and celebrity gossip site called for some answers (who do you think got us to understand Enron, huh? The geniuses over at the WSJ?). While we were totally confident in their abilities to explain the whole mess to us, they’d actually already contacted their resident Wall Street expert, former J.P. Morgan analyst-cum-Mergers and Acquisitions author, Dana Vachon, for some enlightenment.

So let's pretend I don't know anything about the stock market. Actually, there's no need to pretend: I don't know anything about the stock market. What the hell happened yesterday, and why should I care?
What happened is that a rumor got started that the Chinese government was going to clamp down on liquidity; i.e., the Chinese had too much money in the stock market, and were going to take measures to reign in speculation, investment, etc. So, for the first time...ever...the tail wagged to dog. Historically, the U.S. coughs and the rest of the world catches cold; yesterday, China hiccupped, and everyone had a heart palpitation.
And what happened today?
The Chinese government announced that this was just a rumor, positive U.S. growth news came out, and our government and financial establishment got the ducks in a row: announcements of confidence, etc., and everyone believes we are in for another 18 months of growth. But yesterday was a historic day.

Speaking of technologies, was there some kind of Dow computer fuckup yesterday?
Yes, some glitch apparently. Bear in mind, though, that people came to their senses today. I mean, the Chinese rumor was more powerful than the Chinese market.
A butterfly flaps its wings in Beijing...
But durable orders in Chicago squash the butterfly.

We were satisifed with that answer but a Dealbreaker reader, however, employed at one of those bulge bracket banks that thinks they are just SO smart and know just about EVERYTHING there is to know about EVERYTHING emailed us to say, “False!”

“A butterfly flaps its wings in Beijing...
But durable orders in Chicago squash the butterfly.”
Actually, he's wrong, durable orders in Chicago plummeted (less folks
buying big-ticket items, cars, washing machines, etc) and it fueled the
"prefect storm" that sent the markets dipping, not vice -versa as he
briefly insinuates above.
It was a decent GDP number today that lent to the recovery, and some bargain hunting..

Dana, your rebuttal?

What Everybody Ought To Know About Yesterday's Market Plunge
Earlier: DB Coverage of The Glitch