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...beyond that obvious message, is there a deeper meaning? It seems farfetched that such a panic could occur for no good reason and without consequence. We're way beyond normal price volatility here. Throughout history, daily Dow moves of 1% or 2% up or down have been relatively common. But Monday's 7% decline was the 12th worst ever; Tuesday's 4.7% gain, the best in a decade. Was the market right on Monday or on Tuesday...
Like a snake charmer, Greenspan talked the market into a catatonic state--or was it that traders were merely exhausted? Prices remained somewhat stable the rest of the week, and by Friday the Dow stood 9.9% below its all-time high and few investors seemed much worse for the wear. There were some casualties, among them speculator George Soros, whose company lost $2 billion on Monday. Several Fed presidents joined Greenspan in talking up the economy. "The basics of the U.S. economy are strong," said Cathy Minehan, president of the Boston Federal Reserve Bank. "I see no reason why that...
...then the anxiety in New York was too high to be ignored, and traders began to express concern that a "wall of fear" might start to build on itself. When the Dow dropped 350 points, the first circuit breaker kicked in, around 2:35 p.m., and trading was stopped for 30 minutes. "It was eerie," says an exchange clerk. "I was shocked when I heard the bell stop trading." It was the first time circuit breakers had been triggered since their introduction after the 1987 crash. But the break seemed to unnerve traders. The market reopened to another wave...
...right. That morning, the Dow was down an additional 190 points, but that proved to be a bottom. By 11 a.m., Peter Mancuso, floor manager and senior partner at Buttonwood Specialists, was on a roll. "All I hear is buy, buy, buy. It is unbelievable," he exclaimed. The excitement on the floor was uncontrollable. One floor trader shouted at a reporter, "Get out of my way. You're costing me money...
...believed about the never tested market collars designed to let the market--and buyers in particular--catch their breath. Of course, we had never had to use the collars, so who knew? Didn't take long to find out. Traders used these anachronisms, put in when the Dow traded at one-fifth its current valuation, to figure out what to sell. The halt was spooky, flushing sellers from the woodwork when the market reopened. We must have lost 100 points in the time it takes for a bomb to drop from...