How volatile can the markets get?

”The real villains behind last week’s crazy crash.

WHATEVER YOU DO, PLEASE, DON’T MESS with those teeny tots or there’ll be hell to pay.  That warning was writ large in last Thursday’s horrifying break in the stock market.  Around 12:30 p.m., Yahoo! published an AP piece headlined ‘Feds Investigate Baby Bottom Complaints,’ delicately detailing a scattering of reports of severe rashes afflicting poor little tykes who happened to be wearing a new type of Pampers diaper made by Procter & Gamble.

Wall Street being Wall Street — where rumor rules, but parsing actual news stories makes traders’ lips grow tired — two hours passed before the Pampers problem made the rounds.  Once it did, though, it didn’t take but five minutes — literally — for P&G’s stock to shed 22 points to under 40 and help send the Dow screaming 998 points lower.

Happily, cooler heads — or, conceivably, more tranquil bottoms – prevailed, and by the scary session’s close, all but 348 points had been recovered and P&G closed back over 60.  But for bears, after the usual strong Monday, it yielded a trifecta — three consecutive down days, including a couple of triple-digit losses that sliced 632 points off the poor old Dow.  On Friday, moreover, investors were still reeling, and the market fell another 140 points.

There were the usual excuses by the usual suspect sources.  You know, stuff like human error caused by somebody’s wayward finger or some fancied computer glitch, but they always say that.  For ourselves, we remain utterly convinced that what did such a demolition job on stock prices was the infants’ intifada.

In one sense, the market had been asking for it. Sentiment — as we’ve taken some pains to note, and until last week, admittedly futilely — had gone from bullish to dangerously so, as stocks continued their extraordinary flight into the wild blue yonder.”