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Wall Street Traders' Ghastly Day

NEW YORK, OCT. 19 -- At the end, when the market capitulated into free fall, Mark Mehl, the 35-year-old director of institutional stock trading at the large Wall Street firm Drexel Burnham Lambert Inc., lapsed into an eerie and private silence.

Chaos raged around him -- hoarse voices shouted orders, shirt-sleeved traders juggled telephones, news flashed across the big electronic screens in Drexel's open stock trading room -- but Mehl just sat there, staring at his computer screen. All day he had been trying to provide some leadership: standing and clapping at his traders like a football coach, barking encouragement into a microphone, and sometimes banging on a cookie tin to make himself heard above the din.

Now, just after 3 p.m., he sat sullenly behind his module of telephone banks, computer terminals and electronic tickers. His shoulders were slumped and his chin rested on his hand.

"The honest answer is, I've been a little humbled," Mehl said when asked what had come over him. "And when I get humbled, I stay quiet. We took our bet earlier today. We made a mistake."

At midday, Mehl had bet the market had bottomed out, and he was wrong.

"I was a superstar for four hours," Mehl reflected a little later. "Then I was a {expletive}." Mehl was hardly alone on Wall Street today. In the trading rooms of the financial district's great investment houses, on the floor of the New York Stock Exchange, and in the hundreds of small brokerages and investment firms nestled in Wall Street's towering skyscrapers, young traders and investors watched history being made at their expense.

They cracked jokes about it, they slapped each other on the back and talked about changing careers, they shouted wild, profane curses into the air -- and sometimes, as happened to Mehl, they sat still and let it all sink in.

Just after 4 p.m., when the market had closed and the day's bottom had finally been measured, some of them poured into the streets, congregating at the historic corner of Broad and Wall, over which the powerful, columned investment house of legendary financier J.P. Morgan still looms some 58 years after the 1929 market crash that shattered his grip on the nation's economy.

Cranes hoisted television cameras above the crowd that swarmed in front of the New York Stock Exchange to record this latest, and even more dramatic, market dive for posterity.

Just a few doors down from the stock exchange, on the ninth floor of 60 Broad Street, Mehl, Sam Hunter, the Drexel senior vice president who oversees all the firm's stock trading, and other executives of the firm drifted into evening meetings called to assess the day's devastation.

"I'm a little blown out," Mehl said when he emerged from one gathering. "My intellect -- which is now totally useless after today -- tells me that the {stock} markets may get a big lift tomorrow. But the markets can do what they want. They proved that today."

Just seven hours earlier, at 11 a.m., Mehl, Hunter, and the others had been certain that they had beaten the market -- they thought they were winners. The Dow Jones industrial average was down about 250 points, a drop so steep it was almost unimaginable on Friday. Mehl, who directs stock trading for his firm as well as its clients, thought the worst was over. And he decided to make a multimillion-dollar bet. The bet would affect both his firm and its clients.

Over the next five hours, until the market closed, Mehl, Hunter, and the dozens of stock traders under their supervision rode an emotional and financial roller coaster that sapped their spirits as well as their wallets.

"We're having a ball here -- we've finally got this thing turned around," Hunter shouted at 11:26 a.m., slamming his fist on the desk in front of him. The computer screen before him flashed the good news: After plummeting straight down from the beginning of trading, the Dow was finally on the rebound. And it was climbing fast.

Mehl, a lanky man wearing round wire-rimmed glasses, a pink shirt and a brown paisley tie, was nearly beside himself with enthusiasm.

"All you little weasels! I want your orders!" he shouted to the dozens of traders standing at partitioned, open desks in front of him.

With the Dow rising and the bond market improving, Mehl wanted to buy stock -- and buy in big amounts. He was confident.

"You've seen the lows for a long, long time," he shouted into his microphone to his traders. "I want to be long {a buyer of stock} the limit! I want to be long the limit! We saw the bottom!"

His energy and enthusiasm were palpable. Grasping his telephone cord, he twirled the receiver as if it were a baton.

Mehl sat back down and looked at Hunter, his superior, a grey-haired, 27-year Wall Street veteran. Hunter patted Mehl on the back. "The arbs {speculators in takeover stocks} are being destroyed," Hunter remarked.

For a while, it looked like Mehl and Hunter had bet it exactly right. The Dow drove up steadily, until it was down 150 points, then 125, then down just over 100 points. The index was moving faster than it ever had before.

At fifteen minutes before noon, Mehl turned to one of his traders and said: "Did you cancel that vacation? We've got a lot of work to do this week. We're going to make a few million dollars."

"Only in America!" the trader yelled. "Go Twins! Let's do it!"

"This market's going to be tested again," Mehl said, turning to a visitor to explain his strategy. Still, Mehl said, while the Dow was already at a record low, and while he believed it would go lower again before the day was through, he was confident that he had seen the worst, and that now was the time to be a buyer of stock.

"Adversity creates opportunity," Mehl declared. "I think we've seen the lows for three or four months {to come}."

It didn't turn out that way.

Just after noon, the Dow began to slip again. From being down 108 points, it slipped to down 120. Ten minutes later, it was down 150. Mehl could feel that the ground was breaking, he said. This was the test he had anticipated.

At 12:35 p.m., the Dow was down 177 points.

"Let's put our money where our mouth is and find some stocks to buy," Mehl said.

He was still standing and shouting, rallying the troops, answering questions from his traders, pushing them on. He had flown in from business in Tokyo on Sunday, he said, and was working on just one hour's sleep. Jet lag, he said.

"I'm doing the best I can, boys," he shouted at his traders.

At 2:05 p.m., it was clear that the market was not going to pass this latest test. Volume was at 426 million shares -- almost 100 million shares above Friday's record for an entire day. The Dow was down 287 points. Mehl was losing his bet.

"This is a day I'm going to remember the rest of my life," he said. Then: "We had a good two hours and then a bad one hour."

There was still hope in his voice. The market had two more hours to go. Perhaps it would come back.

Mehl huddled with Hunter and two other traders. "Unless the world's coming to an end six months from now and we just don't know it, this market's out of whack," Mehl told them. "If the world's coming to an end, I don't feel so bad."

It was 2:14 p.m. A minute later, Hunter stood up and shouted to the floor: "Don't let any of these buyers get out of the house!"

But after thirty minutes or so of firmness, the market began to fall again, and this time it fell hard. The Dow measure blinking on Mehl's computer screen changed virtually every second. Down 250. Then 300.

With more than an hour to go and the market spinning wildly down, the mood in the Drexel trading room began to change. Mehl fell into a private silence and stared at his computer. Hunter disappeared for a while. The traders grew more angry, more profane.

At 2:27 p.m., a message came over the large electronic Dow Jones news ticker at the far end of the room. It said President Reagan might make a statement about the market's plunge after the market closed.

The traders began to hoot and laugh. "It's Herbert Hoover all over again," Hunter declared loudly.

A trader approached Mehl and asked him, given the market's progress, whether it didn't now make sense to sell a particular stock short -- that is, bet that its price would soon go down.

"Eight days ago that stock was at $82," Mehl snapped. "I don't feel like shorting it at $59."

At 2:40 p.m., Mehl's computer screen told him that declining stocks on the New York exchange outnumbered advancing ones by a 40-1 margin.

"The government has to intervene," Mehl said with exasperation in his voice.

The free fall began just after 3 p.m. The Dow was down 350 points. Then 400. Then 450.

"I can't imagine it going any lower than that," Mehl said when the Dow was down 400. "I guess I should learn to imagine anything."

"There's not a {expletive} thing we can do," Hunter said.