The Dow plunged nearly 1000 points today -- including a 500-point drop off in a matter of minutes -- over fears that the "contagion" of Greek debt could spread throughout the Eurozone.
Or maybe not. Maybe it was a glitch. Accenture reportedly fell from $40 to a penny, which doesn't sound like a very rational valuation. Losing Tiger Woods as a spokesperson is a shame -- and I always liked those poster ads that papered the baggage claim at Reagan Airport -- but it shouldn't wipe out 99.99% of your future earnings potential. The vertical fall/vertical recovery pattern looks awfully dramatic.
Ultimately, divining stock market fluctuations is sort of a fool's errand. Megan McArdle has the right approach: throw out a lot of ideas, but don't commit to any of them as though markets by be easily explained with single causes.
But even a glitch can provide a useful learning opportunity. Whether or not Greece caused this particular slip, its debt crisis is Europe's crisis, too -- and by extension, our own. Spain's borrowing costs are up. Portugal, Ireland, and Italy are all seeing their bond yields rise, which means investors are pricing in more risk in the debt of countries peripheral to Greece.
Sometimes it helps to see this with pictures. This graph, from the New York Times, provides an excellent reminder of the inter-connectivity of Europe's debt. It's not just the case that these countries are running huge deficits. It's also worrying that they owe each other tens of billions of dollars. Greece owes $10 billion to Portugal. Portugal owes $86 billion to Spain. Spain owes more than $200 billion to both France and Germany. If Greece defaults, it's not clear where the domino effect stops.