The New York Stock Exchange (Brian Pascus/NYCityLens)
Jim Riley has seen it all in his 38 years on the floor of the New York Stock Exchange. He even started his family in between barking out orders for a stock. “I met my wife down here,” he says, cracking a smile.
It’s Tuesday morning, February 13th, nearly 9:30 a.m. when the Exchange opens for business. Hundreds of computer screens light up in varying colors. Giant electronic tickers line the walls with numbers, and a massive American flag hangs over the 1,000 professionals who move across the floor. Riley is wearing his blue broker’s coat, with multiple flag pins attached, and his #258 identification badge worn over his heart. He’s giddy for the opening bell.
Last week “the Dow,” as the index is commonly known, had two days of record-setting price drops, with the market falling more than 1,000 points on both Monday, February 5th, and Thursday, February 8th, before ending the week trading in a positive direction. Billions of dollars of wealth had been wiped out. Many Americans and media commentators were left bewildered by the rapid and intense fluctuations, and some even feared an impending crash.
But for Jim Riley, 61, and the other professional stockbrokers at Mark J. Muller Equities Inc., last week’s fluctuations are just another day at the office. In fact, many of them see it as something good for the overall economy. “I think it was a healthy sell-off,” says Robert Moran, 58, a 38-year floor veteran of the NYSE. “Equity returns were unrealistic and now they can find a better asset class—fixed incomes for one. Everything doesn’t go straight up, ya know?”
Mark Muller, the firm’s President, is more cautious prior to the Tuesday opening. “It’s hard to say where we’re going coming after last week’s volatility. We’re finding our bearings and discovering what’s cheap and what’s expensive.”
At 9:35 a.m., five minutes after the bell has been rung, the Dow is already down 150 points.
Riley and the other professionals at Mark J. Muller are full-service equities brokers, who specialize in being their client’s point of sale from execution to clearing. “Only orders generate revenue for us,” Riley explains. He is walking up to an Initial Public Offering at a Designated Market Maker, for a sale that takes place at the start of trading as traders, brokers, and investors attempt to buy in early on a stock’s first appearance in the marketplace. “We got to do what our clients want us to do. We can offer our opinion, but if they say ‘no’ we got to do what they want.”
Watching Riley, Muller, and their fellow brokers move around the floor and interact with the other market professionals at the NYSE seems in some ways like something from the past. The floor is made up of mostly middle-aged men, who smile, back-slap, rib, and laugh at one another like teammates on a pro sports team. Almost all of them have New York accents.
“There’s real camaraderie down here,” Muller muses. “Everybody helps everybody. No matter where I go in the world I know somebody from the floor. When I was on my honeymoon in Bermuda, someone bought me a bottle of champagne from across the restaurant. Turned out to be a guy from the floor.”
“The trust stems from when you trade verbally,” Riley says. “You see each person every day for 30 years. “
James Riley, right, attending an IPO at a Designated Market Maker (Brian Pascus/NYCityLens)
Trust. Integrity. Your word is your bond. These are what the men at Mark J. Muller say are the hallmarks of brokerage. But so is “the market,” a word that is spoken by brokers, traders, and designated market makers alike in humbled tones of reverence. The market is thought as a monolithic force, an omnipotent Leviathan that holds sway over everything these men and women do on their computers and tablets.
“The market does not like uncertainty,” one trader says.
“The market has a mind of its own,” says another.
Others are not as impressed by the fluctuations of the market, even after last week’s 5% loss.
“People are not accustomed to corrections anymore,” says Marcus Koch, 46, a German TV news correspondent who has been reporting on the floor since 1996. “A 1% drop in a day is relatively small. Set it in perspective: In 1987, the Dow lost 24% in a single day! Bear markets start with a 20% drop. Ten percent or less is a correction.”
At 12:30 p.m. the Dow is down 108 points, small but still significant. What was driving this?
“Interest rates have gone higher,” says Dennis Ulikowski Jr., Vice President at Mark J. Muller. “A lot of tech companies are debt heavy. When the government crowds the market”— buys treasuries—”it takes more money out of the system and rates rise.”
“The recent spate of volatility is tied to fears of inflation,” says Riley. “And the probability that the Fed will raise interest rates three more times this year.”
“There’s no simple answer to this anymore,” says Koch. “What dropped the market was huge trades enabled by central bank policies.” He then lists other factors which affected the markets: “Oil prices are weak, the U.S. dollar is weak, commodity prices are up.”
At 2:00 p.m. the Dow is up 80 points. A short but sudden swing. Is change like this the new normal?
“Of course!” screams Koch. “We had 480 days of no volatility. Everyday people just said, ‘New record!’ ‘New record!’ Now it’s up 500, down 500. It’s a good thing.”
And where do we go from here?
“We might have a couple of days like this,” says Riley as he types in an order from his desk. “I don’t know what’s going to trigger the market to make up its mind. Probably gonna be a lot more gradual up and downs with a lot more bumps than we’ve seen this year.”
As with everything on the New York Stock Exchange, the rules out of Washington have an effect on their business. One recent piece of legislation that garnered much talk on the floor was the Trump Tax Cuts, which were passed last month.
“Nobody’s separate from Washington,” Riley says. “We’re impacted by how the overall business community views Washington. You can’t ignore the fact that the markets went straight up after the election and accelerated when the tax bill passed.” The Dow jumped from 18,000 on November 6th, 2016 to over 25,000 at the end of January this year.
The Dow Jones Industrial Average over the past year (graphic courtesy of CNBC mobile ap)
“The tax cut was made to foster growth and re-create the animal spirits,” says Steven Grasso, 49, an Institutional Trader and CNBC Analyst.
Koch, as usual, tempered his enthusiasm. “Well, we’re in the late stage of this enormous expansion cycle and you have this huge stimulus. It’s a risk to increase growth even more, and it could trigger inflation more than growth.”
At 3:45 p.m., fifteen minutes before close, the market is up 74 points. Screens are flashing, phones are ringing, and men are running around the floor.
“It could double in the next ten minutes,” Riley says casually. “Last week $3.5 billion was up for sale at the end of the day.”
Ten minutes pass. The number has fallen thirty-three points, to plus 41.
“It could go down with four minutes to go,” Riley says. “It may even close on the down side. Who knows?”
The seconds tick off. Everyone’s final trades and offers go through. The bell rings and the market closes for the day—up 39.18 points.
“One of the slowest days I can remember,” Riley says with the same smile he walked in with. And he’s not even joking.
