The automated trading event that sent U.S. stocks plunging on May 6, 2010, was the Flash Crash.
During the afternoon, major U.S. indexes dropped rapidly and then recovered much of the decline within minutes. The Dow Jones Industrial Average temporarily fell nearly 1,000 points, an extraordinary move for such a short period.
Investigations found that automated high-frequency trading and a large sell order in E-mini S&P 500 futures interacted with stressed market conditions. Trading venues and algorithms reacted in ways that reduced liquidity and amplified price movements. Some individual securities briefly traded at wildly abnormal prices.
The event led regulators and exchanges to introduce safeguards, including circuit breakers and procedures for reviewing clearly erroneous trades. The Flash Crash is distinct from a conventional bear market: it was an abrupt liquidity and market-structure failure rather than a multiyear collapse in economic expectations.