On CNBC, floor guy Art Cashin described yesterday’s action as “Rumormonger’s Delight.”
In his daily note, the green-clad Cashin goes further into what happened.
Rumormongers Run Amok Sending Stocks Spiraling – The stock market went on several wild and crazy rides in Wednesday’s session and many of the twists were due to our old friends, The International Federation of Rumormongers.
At dawn in New York, the day held hope or, rather, not much dread. Tokyo markets seemed to be stabilizing a bit after two days of near freefall. At 8:30, U.S. markets got hit with at triple dose of negative economic news. PPI came in much higher than expected and Housing Starts and Building Permits were absolutely dreadful.
So, given continuing confusion and worries on Japan and new lousy data, U.S. stocks opened down.
They moved choppily sideways until about 11:00. Then the first rumour hit. A European nuclear official supposedly said something like the “Japanese were fudging and the nuclear event could be a major disaster”.
Suddenly, there was not a bid to be found on the floor. Stocks plunged steeply in a matter of seconds.
There were quick revisions of the supposed comments but they only served to halt the selling but did not produce a rally.
For the next three hours, various folks on various continents made vague, often unsubstantiated claims about the dire nature of the nuclear confusion. Nation after nation competed in banning their citizens from straying within X kilometers of the nuclear sources.
Panic stories were everywhere. Charter planes were said to be offered tens of thousands of dollars to “get me out of Tokyo”. The Economist reported that packs of iodine pills had soared in price from $10 to over $540.
Shortly after 2:00, the rumormongers hit with the quintessentially vague rumour. A very important statement was about to be issued by Japan. No name of speaker. No hint of topic. No time frame. Tough to counter something that vague.
Fearing the worst, stocks headed for lower lows, taking out the support levels that had held for two days.
Then, a report came from Japan saying that the utility involved hoped to string a wire into a crippled facility. That wire would allow for a restart of cooling operations and, thus, end the crisis.
One trader blurted out – “One wire solves the crisis? Sounds like my old man and the Christmas tree”.
Christmas tree or not, stocks grasped at the hope and prices began to rise. The rally was shifting into high gear around 2:45 when a new line hit the newswires.
Chairman Jaczko of the Nuclear Regulatory Commission, who had been quoted throughout the afternoon, apparently said that at least one of the impacted fuel cells had completely run out of water cover. That set up the clear risk of a full meltdown and plumes of radiation in the air.
So much for the lucky wire theory. Bids disappeared and stocks headed close to the lows. A wild and whacky distribution day – and rather ugly at that.