You have stem rot, looks like. Way too wet for that stem there.
Personally I wash all the peat off of the seedling and prop it up with the hydroton you have there but it's a little late for that.
Peat tends to hold too much moisture. If it continues to rot you'll lose the plant.
Try watering so the peat doesn't get wet anymore and try to cover it with more hydroton.
If the rot isn't tooooo bad the plant should recover fine once the stem dries out.
Best of luck!
