Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Investment Technology Group (NYSE: ITG) dropped 15% in intraday trading today after pre-announcing disappointing second-quarter earnings and cost reduction plans.

So what: Management expects second-quarter non-GAAP EPS of $0.12 to $0.15, well short of the $0.20 consensus estimate, and GAAP EPS of -$4.62 to -$5.18. The decision to reduce costs, primarily by cutting jobs, was driven by "continued weakness in institutional equity trading volumes in the U.S. and Europe ... and product and client mix shifts."

Now what: The difference between non-GAAP and GAAP EPS for the quarter owes primarily to $16 million to $18 million of pre-tax charges for cost cutting, and a whopping $210 million to $230 million goodwill impairment charge. The latter only occurs when it is nearly impossible to believe that the outlook will live up to prior expectations. Management expects the cost cuts to begin taking effect during the third quarter of 2011 and positively impact 2012 EPS by about $0.30.

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