Trader Talk

Strange stock market trades confuse Wall Street

Pisani tracking unusual moves: BBY, JOY & more

A strange series of very heavy trading in roughly a dozen stocks has Wall Street traders scratching their heads; here's what I think is happening.

It started at about noon ET. All the trades occurred in roughly the same time period—roughly noon ET to roughly 12:30 p.m.—and the volume in all the stocks was heavy, in most cases several times daily volume.

It all points to one likely explanation: somebody executed some kind of program.

But what kind of program? And was intentional, or did somebody mess up?

Some stocks (CPB, HRS) dropped; some (ADI, CAT, JOY, HRB) went up; others (CVC) went up fast, then down almost as fast.

Two other points:

1) Most of them recovered to a great extent,so most exhibit at least a partial V-shaped pattern.

2) They do not seem related by sector, or any other obvious metric. True, President Barack Obama was aggressively pushing infrastructure during a news conference at this time, so infrastructure stocks moving (CAT, JOY, TSCO) makes some sense, but that would not account for the moves in other stocks.

There are two possible explanations:

1) A Wall Street firm has updated one of its buy/sell lists for 2015. That does happen at this time of the year: many release lists of high quality stocks, or dividend screens, to private clients.

It's possible some firm did that and has not yet made it public.

2) Someone mis-executed a program trade. I say "mis-executed" because it is hard to believe that anyone who wanted to buy and sell a basket of stocks with significant volume would dump such a large amount on the market in such a short period of time. Any professional trader would execute such a basket over many hours, with careful attention to disrupt the price as little as possible. That's not even difficult to do: it is common practice.

As part of this "mis-executed" theory, it is also possible that a hedge fund accidentally started liquidating their portfolio, and then noticed it and reversed. How do you know? Because your profit and loss statement suddenly goes haywire.

Either that, or someone is trying to execute a series of pair trades and have no idea what they are doing. Seems unlikely.

Personally, I think somebody messed up. Professionals do not execute such sloppy trading deliberately.