President Obama said Friday that regulatory authorities are looking into Thursday's wild swings in the stock market with an eye toward protecting investors and preventing a recurrence. And members of Congress said they also want answers about what happened on Wall Street.
A computerized sell-off sent the Dow Jones industrial average plummeting by a near-record 1,000 points within about a half-hour Thursday afternoon. Fear that the European debt crisis could spread was a factor. The market regained two-thirds of that loss before the end of trading.
"The regulatory authorities are evaluating this closely, with a concern for protecting investors and preventing this from happening again," Obama said Friday. "And they will make findings of their review public along with recommendations for appropriate action."
Congress wants answers to the sudden stock market plunge and is pressing government regulators to undertake a thorough review to ensure that high technology trading is well monitored.
In the Senate, Democratic Sens. Ted Kaufman of Delaware and Mark Warner of Virginia were working with Senate Banking Committee members to address Thursday's market swing in a pending financial regulation bill.
The senators said they want the Securities and Exchange Commission and the Commodity Futures Trading Commission to recommend how to avert the technological glitch suspected of precipitating the plunge.
Kaufman said Thursday that "regulators need to better understand high frequency trading, which appears to have played a role" in the market's swings. "The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today.
"The battle of the algorithms -- not understood by nor even remotely transparent to the Securities and Exchange Commission -- simply must be carefully reviewed and placed within a meaningful regulatory framework soon," Kaufman said.
In the House, Democratic Rep. Paul Kanjorski of Pennsylvania called for a hearing Tuesday of his House subcommittee to examine the causes of the sudden market drop. Kanjorski asked SEC Chairwoman Mary Schapiro to investigate the causes of Thursday's volatility.
"Preliminary reports suggest that erroneous trades may have occurred this afternoon and such a drastic, steep decline raises serious concerns about automation and computer trading more broadly," Kanjorski wrote in a letter to Schapiro. "While advances in technology have generally benefited market participants, investors need assurances that they will not suffer losses because of technological glitches."
In a joint statement Thursday, the SEC and CFTC said they "are working closely with the other financial regulators, as well as the exchanges, to review the unusual trading activity that took place briefly this afternoon. We are also working with the exchanges to take appropriate steps to protect investors pursuant to market rules.
"We will make public the findings of our review along with recommendations for appropriate action," the agencies said.
The market turmoil came amid continuing concerns about the Greek debt crisis and whether it would spread to other countries.
Obama said he spoke Friday with German Chancellor Angela Merkel about the economic situation in Europe. He said they agreed on the need for a strong response by the affected countries and the international community.
"I made clear that the United States supports these efforts and will continue to cooperate with European authorities and the IMF during this critical period," Obama said.
Turbulence continued in the stock market Friday, as traders looked past a surprisingly strong employment report, focusing instead on Europe's spreading debt crisis and Thursday's dramatic stock market plunge.
Stock prices were fluctuating sharply Friday, paring some of their earlier losses.
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