Joe Mazzella leaned forward and pored over the stock data blinking on the computer screen in front of him. With a few minutes to go before the markets opened on Wall Street, the trader psyched himself up for another wild ride.
JERSEY CITY, N.J. — Joe Mazzella leaned forward and pored over the stock data blinking on the computer screen in front of him. With a few minutes to go before the markets opened on Wall Street, the trader psyched himself up for another wild ride.
He described the frantic pace his colleagues have seen the past few weeks as “going like the hammers of hell.” Fast-paced markets with huge swings in the Dow Jones industrials have become commonplace — but that doesn’t mean traders aren’t anxious.
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Mazzella, a trader with Knight Capital Group, shifted uneasily in his chair. Last week, the Dow had ended an eight-day losing streak that had sliced 2,400 points from its value, and Monday, it surged a record 936. Tuesday was a relatively mild day, with the blue chips falling just 76. Now, with trading about to begin Wednesday, it looked like another bad day was at hand.
At 9:29 a.m., just seconds before opening bell, the noise level in Knight’s Jersey City trading room ramped up with traders barking last-minute orders over loudspeakers. When the bell sounded, it was met by something unexpected — silence.
“That’s scary, it’s too quiet in here,” said Mazzella, a managing director at Knight. “Nobody knows what to do in these kind of markets, nobody is ready to sell or buy and we’re all just sitting here watching.”
Even with an array of technological and analytical tools at their disposal, the people who buy and sell stocks for a living find themselves aghast along with the millions of Americans whose portfolios and 401(k)s have been decimated.
When trading began Wednesday, the Dow plunged 200 points. While many people might expect the trading floor to be in utter chaos, the tempo at Knight was boisterous but far from frantic.
Most of the traders knew the market was set for a tumble. They’d come in hours before, taken off their jackets, rolled up their sleeves and studied the data on their computer screens. The headlines were again gloomy — consumer spending was tight, banks were losing money, and there were growing fears of a recession.
Unlike retail investors who tend to hold stocks for a year or longer, floor traders at Knight work for customers such as hedge funds, portfolio managers at retirement funds and other big institutional investors. They get orders to sell a stock sometimes only to buy it back a few minutes later.
These times have been tough: “What’s humbling is that you could be the best trader, best investor, or best analyst in the world and this market will still bring you to your knees,” Mazzella said.
The first half hour of trading is one of the most important because it sets a direction, he said. The next most important point is around 11:30 a.m. Eastern time, when European bourses close, and those investors begin trading in U.S. stocks. And, the last hour of the day usually sees the market settling on a final direction — but at an accelerated pace.
Though most of the session seemed quiet, traders regularly got on the loudspeaker — a system they call a “Hoot and Holler” — to broadcast stock positions and recommendations to colleagues that deal directly with clients.
Robert Competiello, another trader, commented to a passer-by that some days have been like “juggling knives while balancing on an egg.”
That certainly became the case around 2 p.m. when the Federal Reserve released its Beige Book report that assesses business conditions. The report showed the economy continued to slow as the credit-market problems worsened, and that spooked investors; the Dow was down 500 points in anticipation of the report, and it continued falling.
Rally never comes
Traders sprang into action. Mazzella made a few trades and kept his eye on the declines in the Standard & Poor’s 500 index. The market appeared to be picking a direction that, from experience, he knew would be hard to recover from.
“We need a rally, I’m telling you, buddy,” he told another trader on the telephone.
That rally never came. The market swung back and forth in the final hour of trading before giving in to a stream of selling in the last minutes. At Knight, the day began to wind down as it began, with traders screaming out orders before the final bell — which left the Dow down 733, its second-largest point drop ever.
“We just cut to the low like a knife through butter,” Competiello said as the closing bell sounded.
“Yes,” another shouted. “It’s over.”
The traders sat stunned for a few minutes before slowly standing up, stretching like they had just landed from a long flight.
“We’re a lot like athletes,” Mazzella said. “The score is zero to zero when the game starts and the opening bell, and by the closing bell you know the score. Right now, we’re already thinking about our next game.”