Forbes India 15th Anniversary Special

How 7 traders dealt with Wall Street's two terrible weeks

Here's what the past two weeks looked like to Wall Street traders and investors, from the Goldman Sachs trading floor to the Magic Kingdom, as they struggled to make sense of the market mayhem—knowing that it's unlikely to end anytime soon

By James B. Stewart, Kate Kelly, Matt Phillips and Tara Siegel Bernard
Published: Mar 9, 2020

A TV shows coronavirus cases at the New York Stock Exchange in Manhattan, Wednesday, March 4, 2020. The past two weeks were among the worst in recent Wall Street history, as anxiety about the coronavirus outbreak gave way to alarm and drove panicked investors to sell their stock holdings, obliterating roughly $2 trillion in wealth. (Jeenah Moon/The New York Times)

The past two weeks were among the worst in recent Wall Street history, as anxiety about the coronavirus outbreak gave way to alarm and drove panicked investors to sell their stock holdings, obliterating roughly $2 trillion in wealth.

Ultimately, investors were forced to face an inescapable truth: With factories and schools and entire cities shutting down, and no clarity on when or how the contagion would end, the global economy was shrinking. And the bull market that had run for over a decade was threatening to come to an end.

The S&P 500 stock index has plummeted 11% in just 10 trading days. Three out of every four stocks in the index are down more than 10% from their peaks. On Friday, even after a slug of good news — the Labor Department reported that 273,000 new jobs were created in the United States last month — investors kept selling. The S&P 500 was down more than 3% early Friday, but rallied into the close, trimming losses to 1.7%.

Here’s what the past two weeks looked like to Wall Street traders and investors, from the Goldman Sachs trading floor to the Magic Kingdom, as they struggled to make sense of the market mayhem — knowing that it’s unlikely to end anytime soon.

Monday, Feb. 24, 4 a.m.

Markets are set to open, and it smells like panic.

Jim Stack was on the Big Island in Hawaii. A market historian and investment manager based in Whitefish, Montana, Stack was a 45-year veteran of the finance industry. He was nearing the end of a four-week stay at his Hawaiian home. He logged in to his firm’s computer network and got on a call with his team.

It was 4 a.m. in Hawaii, but 9 a.m. in New York, and stock markets in the U.S. would open in half an hour. The prior week had ended with the S&P 500 declining 1% Friday — several weeks since the first coronavirus case appeared in the U.S., and two days after hitting an all-time high. On Friday, Stack had noticed “some pretty hard selling,” he said. “It didn’t look like investors simply trying to grab profits and reduce risks,” he said. “It smelled like panic.”

In those predawn hours in Hawaii, Stack monitored the market open and saw “nothing but red” on his computer screen as just about every stock in the S&P 500 hemorrhaged value.

“You had extraordinary selling right out of the gate,” he said, “indiscriminate selling.” It was one of the worst days that he could remember in the markets — “the intensity was not much different from Black Monday in 1987,” he said. On that dark day, the S&P 500 had plunged 20%. Stack didn’t make the comparison lightly.

Still, there was little for him to do. “We knew it was best to watch the mayhem from the sidelines.”

Tuesday, Feb. 25, 12 p.m.

A selling frenzy follows a scary health warning.

Jeb Breece glanced at the nearby TV, tuned as always to CNBC. The volume was off, but it took only a moment for Breece, a principal at the New York money-management firm Spears Abacus, to glean what was happening. After Monday’s 3.4% decline, the markets had opened ugly and were getting worse.

The catalyst, as far as Breece could tell, was a warning by a federal health official that the coronavirus was coming to America; it was a question of when, not if. For a market on edge, this was enough to set off a fresh wave of frenzied selling.

Breece had been thinking for weeks that the coronavirus was going to take a bite out of economic growth and corporate profits. In mid-February Chinese e-commerce giant Alibaba — a stock he owns — had warned that the virus would cause its sales to decline in the first quarter of 2020. That was a clear sign to Breece that the Chinese economy — the world’s second-largest — was in trouble.

Breece had started selling shares of companies whose fortunes are tied to the short-term ups and downs of the economy. Among other moves, he’d gotten rid of all of his shares of Schlumberger, the giant oil-services company.

But early Tuesday afternoon, he was a bit surprised to see investors reacting with alarm to a federal official’s borderline-obvious prediction that America would not be immune to a fast-spreading virus. “I said, ‘Is that new news?’ ” Breece recalled. “Of course, this is bad.” But the selling pressure kept building, as the rest of the world focused on what Breece had already anticipated.

Thursday, Feb. 27, 9:45 a.m.

He’s on vacation, watching his phone.

The aircraft doors were closed, the plane was preparing to depart from Newark, New Jersey, to Orlando, Florida, and Douglas Boneparth was anxious.

The 35-year-old financial planner was taking his family to Disney World. The vacation had been set for January, but his 4-year-old daughter got the flu, so they had rescheduled for late February. Now Boneparth was beginning to wonder if he would be able to fully enjoy the trip.

For the previous five days, he’d been glued to news coverage of the spreading coronavirus. When the markets convulsed Monday and Tuesday, Boneparth had been surprised not to hear from nervous clients; he later realized his repeated reminders to them — markets go up, markets go down, recessions are inevitable — had had their desired effect.

But as he waited for take off Thursday morning, he worried about what might unfold in the days ahead. “I am on the plane, on the tarmac waiting to take off during the first 30 minutes of the market opening, and it’s getting absolutely beaten up,” he said.

By the time the plane landed in Florida, the S&P 500 had tumbled 2% — and was still sinking. His clients weren’t panicking, but he kept a close eye on his phone, as he and his wife rushed to a boutique inside the Magic Kingdom, where their daughter had an appointment to be transformed into Elsa, her favorite princess.

Friday, Feb. 28, 3:42 p.m.

On the exchange floor, ‘buy’ orders suddenly pour in.

The traders on the floor of the New York Stock Exchange were a mess. It had been a taxing, high-stress week and market fears were leaking into daily lives. Peter Tuchman, a floor trader for Quattro Securities, noticed that his colleagues on the trading floor were bringing their lunches from home rather than ordering out.

“People were starting to be concerned about their health and the well-being of their families,” he said. “They’re worried about their portfolios, and they’re concerned that life as we know it will be interrupted.”

With about 15 minutes left in the trading day, the S&P 500 was down about 3%, putting it on track for a devastating 13% loss for the week.

Tuchman specializes in rapid-fire buying and selling around the opening and closing bells. This day, though, he had no interest in trading. He was staring at the largest, fastest market correction of all time. “I’m not going to stand in front of an oncoming train,” he said.

And then, all of a sudden, the trajectory reversed. “Buy” orders — originating with index funds and pension funds — began pouring onto the exchange floor. Stocks jumped. That put pressure on investors who were betting on further declines; they liquidated their short positions, propelling the market higher still. Within minutes, the S&P 500 had climbed roughly 50 points, erasing a large portion of the day’s losses.

“It caught everyone off-guard,” Tuchman said. “It was down, down, down, and then it turned on a dime.” He didn’t join the frenzy, in part because he didn’t understand the rally. “I let the market do what it was going to do,” he said.

Tuesday, March 3, 10 a.m.

Then, the Fed news broke.

Someone screamed on the Goldman Sachs trading floor: “Fed emergency cut!”

A bright-red news bulletin had just crossed Bloomberg terminals: The Federal Reserve was slashing bench mark interest rates by half a percentage point — an emergency action that the bank hadn’t deployed since the 2008 financial crisis. Markets, not just for stocks, but for bonds and currencies, too, went haywire.

Jen Roth, the head of Goldman’s currencies and emerging markets business in the U.S., was on the fifth floor of the bank’s headquarters in downtown Manhattan. The past two weeks had been surreal. She’d been on the road, visiting clients in São Paulo and California. The Brazilians, normally interested in discussing local issues, wanted to talk about little other than the coronavirus’s impact on markets. In Los Angeles, she was informed that hers was one of the last in-person meetings her client would be having for a while, fearful of contagion.

Back in New York, Roth was making sure her sales-and-trading desks — normally on an 11-hour schedule — would be working from 5:45 a.m. to 11 p.m. Pizzas were delivered so nobody had to leave their desks for lunch. Clients were picking up the phone to place orders, rather than relying on electronic chat programs as usual. “The market’s moving too quickly” to do business via a chat room, she said.

Salespeople and traders were showing signs of fatigue. Then the Fed news broke; Roth heard gasps and screams as everyone turned back to their monitors. Salespeople spent the next six hours glued to their phones, trying to keep up with a blizzard of buy and sell orders as clients all over the world rushed to reconfigure their holdings of dollars, euros and other currencies.

That night, the staff again stayed late, making sure that all of the trades had been properly executed and the paperwork completed — and speculating about which central bank would be next to take action to fend off an economic downturn.

“I have no energy left to speak,” Roth told her husband later that night, as she collapsed into bed.

Thursday, March 5, 2:45 p.m.

Coronavirus fear keeps an investor’s big night out inside.

Billionaire investor Daniel S. Loeb had rented out Jazz at Lincoln Center in Manhattan for an event, in part to celebrate the 25th year of his hedge fund, Third Point. It was scheduled for Monday, March 9.

On Thursday afternoon, with markets again in free fall and new cases of coronavirus popping up around the U.S., Loeb sent out a short note to investors: After consulting with medical experts, he had made the “sad” decision to cancel the gathering, which would be replaced with a live webcast. Perhaps, he wrote, the party would be rescheduled for later in the year.

Friday, March 6, 4 p.m.

This is not like 2008, and there’s little the Fed can do to help.

Having already protected his investments from further drops, Friday seemed a good day for Alan Fournier to engage in some selective buying as stocks started falling once again.

Fournier, the head of Pennant Investors, which has several hundred million dollars invested in the stock market, had been worried about the coronavirus causing a market plunge since around Feb. 20. Starting then, and continuing over several trading days, he had put on new short positions, or bets that certain markets would fall, to counteract losses from potential drops in the stocks he already owned. His focus: the S&P 500, which he suspected would plunge dramatically as new cases befell Americans and fear spread, and the German DAX index, which was heavily exposed to manufacturing companies hurting from the slowdown of activity with China.

As the S&P 500 plummeted in recent days, those bets looked prescient. On Friday, with prices looking cheap, Fournier bought additional stock in four of his firm’s longer-term investments. Other investors were also buying. In the final minutes before the closing bell, the S&P 500 pared its losses for the day.

A 58-year-old trading veteran who had bet profitably against risky mortgages affected by the housing crisis more than a decade ago, Fournier tried to instill calm among his younger colleagues in Summit, New Jersey, this past week. Huge gyrations are a fact of life in stock market crises — “they rip up, and they rip down,” he counseled — and the best approach was to be unemotional.

Still, this is not like 2008, he said, and there’s not as much the Fed can do to help.

“We’re at an inflection point in the economy,” he said, “and those periods are always very volatile.”

©2019 New York Times News Service