As traders prepared Tuesday to return to the site of the Dow industrials' biggest point drop ever, they were anything but sure if the first test of mandatory trading halts helped limit or extend the damage.On Monday, in what would be the busiest day ever on the New York Stock Exchange, mandatory pauses designed to let calm heads prevail kicked in twice, eventually cutting short the trading day.
"I think it hurt a lot more than it helped," said Charles Payne, president of Wall Street Strategies, a market analysis firm. "Every time they held today, the anxiety built."
The shutdown "probably kept things from getting a lot worse," said Joe Pettibone, a trader with the Boston firm of Adams, Harkins and Hill. "To me it was very quiet and orderly."
As the New York Stock Exchange board halted at 2:35 p.m., with the declining Dow frozen in a kind of suspended animation, traders who had driven the blue-chip stock index down 354 points had 30 minutes and a chance to catch their breaths. Instead, they seemed to have merely gotten a second wind.
When trading began again at 3:05 p.m., it took just 25 minutes for the Dow to lose another 200 points and trigger a one-hour halt. With the regular closing bell just 30 minutes away, the day was done.
The automatic pauses were triggered for the first time since NYSE officials created them in 1988 in response to the Black Monday crash of Oct. 19, 1987.
The mandatory shutdown that stopped action on the New York Stock Exchange was designed to halt panic selling. It did not do that, said trader after trader, because the big selloff was no panic.
"When you get that momentum, they'll just sit around and wait a while" until trading resumes, said Steven Adler, president of the Index 30 Fund, a mutual fund based in Tampa, Fla., that is indexed to the Dow industrials. "It didn't change the results."
By afternoon, as the selling picked up momentum, the giant electronic tickers above the floor told the story of the manic Monday. Traders stole glances at the ticker as the Dow registered the rapid 350-point drop.
When the first bell sounded and the usual sports arena-level din fell almost silent, many traders simply wandered off the floor. They used the break to smoke, talk, eat and relax. Asked what was happening, they avoided the word "panic."
"I wrote reports - we had a huge backup," said a 24-year-old trader who closed out the trading day with a Budweiser and a smoke at a bar on Broad Street, down the street from the exchange. He declined to give his name.
A circuit breaker automatically halts trading on the New York Stock Exchange for half an hour when the Dow Jones Industrial Average drops by 350 points and again for an hour when the blue-chip indicator drops by 550 points.