Dow technical glitch explained

— 10:19 AM on March 1, 2007

CNN Money has learned some details regarding the technical glitch that hit the Dow on Tuesday afternoon, causing its biggest point decline since September 2001. According to company officials, a system problem at 1:50 PM EST on Tuesday caused a 70-minute lag between the value of the market measure and stock declines.

Michael Petronella, the president of Dow Jones Indexes, said there was a problem with the system that feeds market data into the calculation system. While the [Dow Jones Industrial Average] was still being calculated and disseminated, the calculator was not receiving the underlying prices for the 30 stocks in the Dow on a timely basis.

Once the slow data feed problem was recognized, Dow Jones Indexes switched to a back-up system, causing prices to be adjusted all at once, bringing the index immediately in line with its underlying component stocks. That led to the big 200-point drop.

The Dow dropped a whopping 416 points altogether, which CNN Money says is the industrial average's seven-biggest point decline ever. Miller Tabak & Co. told CNN, "To see the market drop hundreds of points out of nowhere was alarming, to hear that it was a technical glitch really pissed people off."
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