Wall St. Sees Few Glitches in Aftermath
Tanned and rested they were not, but Wall Street professionals got back to work Friday, coping surprisingly well with spotty communications and huge transportation problems in the wake of one of the worst power failures ever in North America.
With financial firms and markets understaffed -- even by Wall Street’s mid-August summer vacation standards -- trading in stocks, bonds and commodities was unusually light, yet prices showed little of the volatility that sometimes comes during emergencies. Indeed, the major market indexes finished little changed.
The Dow Jones industrial average edged up 11.13 points, or 0.1%, to 9,321.69. The Standard & Poor’s 500 index rose a fraction of a point, or less than 0.1%, to 990.67 and the tech-laden Nasdaq composite index closed up 1.67 points, or 0.1%, at 1,702.01.
“It’s very, very quiet,” said Tim Smalls, managing director at S.G. Cowen. “Everyone’s running on a skeletal staff.”
Contingency plans developed after the Sept. 11 terror attacks were put to a tough test Friday. Some markets operated on emergency generator power and reduced trading hours, and some brokerage and investment firms retreated to backup work sites.
Even sleeping arrangements were dicey for people stranded in Manhattan on Thursday after the blackout shut down the city’s transit system. At the New York Stock Exchange, for example, Chairman Richard Grasso estimated that 300 people spent the night, stretching out as best they could in the NYSE’s two cafeterias and its cavernous board room. Grasso spent the night on his office couch, he said during a briefing with reporters Friday morning.
The NYSE was prepared to power its trading with backup diesel generators, which were turned on Thursday night, Grasso said. However, regular power from Consolidated Edison was restored about 6 a.m. EDT Friday, allowing the Big Board to switch back over in time for the regular opening of trading at 9:30 a.m., with New York Mayor Michael Bloomberg ringing the ceremonial opening bell.
“We’re up and operating, business as usual,” Grasso said.
Robert Greifeld, president and chief executive of Nasdaq Stock Market Inc., said “a small minority” of market makers and electronic networks that trade on the Nasdaq system were off-line, but more than 90% were up and trading.
“The U.S. markets have performed well,” Greifeld said. “The players were ready to go.”
He said Nasdaq was able to handle its usual capacity, though trading volume was off about 40% from a typical summer Friday as some market professionals stayed home.
The American Stock Exchange, by far the smallest of the three main U.S. exchanges, failed to open on time Friday morning because of a lack of ConEd power to cool its computers. The timing was bad for the Amex, which specializes in options trading, because August options expired Friday.
Running on portable generators, Amex conducted a sharply abbreviated trading session of less than an hour to enable options traders to adjust their positions. Other markets that trade options also helped pick up the slack, traders said.
“Although frustrating for our employees, business partners and investors, the magnitude of the circumstances created by the historic blackout made it impossible to resume trading earlier in the day,” Amex President Peter Quick said.
Amex expects to resume normal trading Monday, he added.
Linda A. Jay, a specialist on the NYSE trading floor, said volume was only about one-third of what was expected, considering that Friday was a so-called double-expiration day in which individual equity options and some stock-index options expire and trading activity typically rises.
Although the Big Board’s systems operated well, Jay suspected that traders elsewhere in the city or in other areas affected by the big blackout were having trouble placing their orders.
Some of Charles Schwab Corp.’s investor centers in Manhattan stayed closed Friday, said spokesman Morrison Shafroth. Throughout most of the country, he added, Schwab encountered no glitches.
Regional brokerages said operations went smoothly.
Chris Orndorff, head of equities at L.A.-based brokerage Payden & Rygel, said his firm was routing trades to banks for settlement earlier in the day than unusual at the banks’ request, to help avoid any processing backlogs.
“The banks are operating out of disaster recovery sites with short staffs,” Orndorff said. “They’re asking us to send them trades earlier and requesting, if you read between the lines, that we not inundate them with volume.”
At bond giant Pimco in Newport Beach, spokesman James Clarke also reported no major problems.
“Trading volumes have been low,” Clarke said, “but we’ve been able to execute the trades we want to with no technical problems at all.”
Strategists said it was heartening to see stock prices stable throughout the trading day, as investors were reassured that the blackout was not caused by terrorism. But they cautioned that it was an atypical session with light trading volume.
The bond market also was quiet. Treasury yields plunged immediately after the blackout hit as investors sought safety in government securities. But yields inched up Friday as investors unwound those late Thursday trades and reacted to mildly positive economic reports.
In other markets, oil futures were little changed in New York trading. The power failure forced many U.S. and Canadian refineries to close, which could erode demand for crude oil. But gasoline futures rose to a five-month high. Gold also traded lower as initial jitters over the blackouts subsided and power slowly returned to New York City.
For some New Yorkers, Friday was a day of relaxation as many did not go to work.
“There’s a festive atmosphere,” said Julie Haspel, a Manhattan psychologist, as she strolled through Union Square Park on Friday morning with her husband and two children. Though the family couldn’t take showers and food might spoil in their refrigerator, Haspel worried that electricity would be restored too soon, thus marring the vacation-like feel of the day.
“You know the power is going to go back on,” she said. “We feel like we have just a few more hours of enjoying it.”
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Reuters was used in compiling this report.
