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Markets Recover As Calm Prevails
Traders at the New York Stock Exchange had to contend with a rapidly falling Dow Jones industrial average, which ended down 416 points.
(By Daniel Acker -- Bloomberg News)
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Traders said that generally, when they send buy or sell requests via a handheld device, those orders are reflected almost instantly on trading-floor screens. That was not the case Tuesday.
"We were just sitting on our hands," said a trader who requested anonymity because he was not authorized by his firm to speak to the press. "I kept going back to the specialist, asking, 'Did you get it? Did you get it yet?' But nothing was showing up."
Because they could not see whether their orders had registered, some traders sent the same order twice, which meant they ended up buying or selling twice as many shares than they wanted.
Some of that frustration eased Wednesday after stocks got a noticeable bump before 11 a.m., as TV screens flashed images of Bernanke speaking before Congress. The Dow recovered more than 100 points after Bernanke said the U.S. economy remained stable and he addressed the growth of high-risk mortgage loans known as subprime mortgages, one of the biggest concerns in the market. Troubles in that part of the lending industry, he said, were unlikely to spill over to the larger lending industry.
"There is really no material change in our expectations for the U.S. economy since I last reported to Congress a couple weeks ago," Bernanke said.
Although investors seeking shelter in stable investments bid up the price of Treasury bonds Tuesday, those bonds fell Wednesday as stocks recovered some losses. The yield on the benchmark 10-year treasuries, which falls as prices rise, reversed more than half of Tuesday's declines.
The rally in stocks was led by health care, consumer staples and other defensive stocks that tend to fare better during a market downturn.
"I think that's what's putting a floor underneath the market today," said Joseph Quinlan, chief market strategist at Bank of America.
Many analysts said it would take at least several days for the market to settle, and cautioned investors from making hasty decisions.
"There's been some improvement, but I wouldn't expect to have an immediate sense of clarity," said Steven Wieting, an economist with Citigroup.
For now, some money managers said their investment view remained unchanged from the day before the market dropped.
Chad Peterson, spokesman for TIAA-CREF, a financial company that manages more than $400 billion, said that portfolio mangers there were "sticking to existing stock-picking strategies."
