The event on May 6, 2010, that caused US stock indexes to plunge and rapidly rebound was the Flash Crash.
During the afternoon of May 6, major US equity indexes fell sharply in minutes before recovering much of the loss. The Dow Jones Industrial Average briefly dropped nearly 1,000 points, then rebounded. Many individual securities also experienced extraordinary temporary price movements, including trades at implausible levels.
Investigations found that a large automated sell order in an already stressed market interacted with high-frequency trading and liquidity conditions. The US Securities and Exchange Commission and Commodity Futures Trading Commission later described a feedback loop in which selling, withdrawals of liquidity, and automated responses amplified the move. A later US Justice Department case identified trader Navinder Singh Sarao’s spoofing activity as a contributing factor, but the event also reflected wider market-structure weaknesses.
The Flash Crash was different from a conventional bear market: it was extremely sudden and partially reversed the same day. Regulators responded with measures including single-stock trading pauses and broader safeguards against disorderly electronic trading.