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CNN NEWSROOM

Trading Halted At NYSE After Seven Percent Drop At The Open. Aired 9:30-10a ET

Aired March 9, 2020 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


[09:30:00]

CARL GOLDMAN, CRUISE SHIP PASSENGER: That may be what's slowing me down but there are six others here who came at the same time and they also are still testing positive.

JIM SCIUTTO, CNN ANCHOR: Well, listen, Carl, we wish you a speedy recovery and we hope you're out of there and home soon.

POPPY HARLOW, CNN ANCHOR: Yes.

SCIUTTO: Thanks so much.

HARLOW: Thank you, Carl.

GOLDMAN: Thanks, guys. Take care.

SCIUTTO: All right, the breaking news on Wall Street, markets have just opened. The Dow is set to tumble, there you go, down 1500 points. Fears of economic slowdown but also a drop in the oil market. Goodness.

HARLOW: Christine Romans is here with, again our chief business correspondent. Alison Kosik is at the stock exchange. Dow off 1700 points, nearly 7 percent.

Put this in context for us.

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: All right, when you get down 7 percent they're going to stop trading. There's going to be this circuit breakers that hit. So there are these natural levels where they try to stop panic from ensuing, so I'm not ruling out that that could happen here sometime soon.

Here is what's happening. Coronavirus fears for several weeks now, news over the weekend that shows it is spreading in the United States and the U.S. has gone from containment to mitigation. That means now we're dealing with the fact that it is in the community and it is spreading in the United States. CNN is now calling it a pandemic. So that's where we are in coronavirus.

Add into that a crash in the oil market, because of a big dispute between Russia and Saudi Arabia. A crash in oil prices 30 percent remarkable. Watching here very closely. When the S&P 500 hits this level it will stop. This is the Dow Jones Industrial Average, that's 30 stocks, it's a narrower look at what is happening in the economy.

So watching all of this together with bond yields at an historic 0.44 percent, you have global markets in turmoil, you guys.

SCIUTTO: I mean, we're looking here at previous percent. You always want to watch the percentage, right? Because the market goes up and down. Percentage tells you what chunk of the market has disappeared. You got to go back to 2008 to see one this high.

ROMANS: Yes. That's right.

SCIUTTO: Then you go back to '87, you go back to previous really bad panic days on the market.

ROMANS: A depression.

SCIUTTO: Alison Kosik, she's down on the floor there. What are investors saying, Alisyn, about this? Where are they looking for a sign of relief?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: I think at this point I've never seen this much anxiety on the floor of the New York Stock Exchange. I'd say since the opening after 9/11, after the floor was closed. There are traders running everywhere. And we are watching these levels.

I know you're talking about the Dow and its loss of 1800 points. We are watching the S&P 500 because when it hits the level of 2764, right now it is at 2769, we're at 66. So we're two points away from possibly seeing trading stop here at the New York Stock Exchange.

They're called circuit breakers. They're measures put into action to stop the trade, because the tumbles are happening too quickly. Too fast. So basically the circuit breakers are put into action so, you know, heads can -- sort of better heads can sort of start thinking about what's going on and everybody can assess the trade. If we hear a bell, trading has stopped.

SCIUTTO: Yes.

KOSIK: Has trading stopped?

HARLOW: OK.

SCIUTTO: It has passed that marker, though, based on -- if you look at the screen, it passed.

HARLOW: Yes.

SCIUTTO: Christine Romans, the 7 percent mark?

ROMANS: For the Dow, yes, but I don't see --

SCIUTTO: On the S&P?

ROMANS: I don't see it yet for the S&P but we'll watch really closely here. I mean, it's awful close and look, it's -- six and one-half dozen of the other. I mean, this is a really ugly morning for the stock market and it tells you that investors want to be out of stocks and into safe assets like bonds, and like gold, and things that they know they're going to get their money back eventually.

We have stocks dramatically off of their just February 19th or earlier this year highs. In fact, you already had a correction hit. Much more action like this, and you're nearing bear market territory. European shares already are in a bear market.

You know, this is the 11th anniversary of the bull market. On this day. Exactly 11 years ago, we were all sick to our stomachs watching the market fall apart. But that, that was the day where the green chutes of the bull market were beginning to come.

HARLOW: Romans, can I just ask you for --

ROMANS: Sure.

HARLOW: For perspective that are here for people, because there is a difference between now and 2008, when the fundamentals were not there, the consumer had lost all confidence, Lehman was collapsing, Bear Stearns went away.

ROMANS: Yes. Yes.

HARLOW: I mean, the world economy changed. This is different and also there are mechanisms in place that stop things when there is a panic. Right? There are triggers. So can you just explain for people at home not knowing what sense to make of this?

ROMANS: Sure.

SCIUTTO: Right.

ROMANS: So this is a virus problem, and now an oil problem on top of that.

HARLOW: Yes.

ROMANS: You also already have interest rates around the world that are very, very low. The Fed has been propping up -- central banks have been propping up or nursing the economy along for a decade now. So they have less that they can do. And investors are aware of that. What they're looking for is coordinated -- there we go.

SCIUTTO: One moment, Christine, hold that thought because -- Alison Kosik down on the trading floor.

Has trading now stopped? Has it hit that 7 percent trigger?

KOSIK: Trading has stopped because we've seen a drop of 7 percent, which means trading will stop for the next 15 minutes.

[09:35:02] The idea is so speculative trading doesn't come in, so accurate information comes into the marketplace, and cooler heads can prevail and everybody can assess their positions. The idea with circuit breakers is putting these measures in so everybody can kind of take a breath -- Jim.

HARLOW: OK. Romans, we heard --

ROMANS: So 2008, just to finish my point.

HARLOW: Sure.

ROMANS: 2008 interest rates were a lot higher. You know, they were like, you know --

SCIUTTO: So you had more leeway.

ROMANS: You had more leeway.

SCIUTTO: To give the market a boost.

ROMANS: Absolutely. Absolutely. And now you have interest rates at 1 percent to 1.25 percent. They're expecting two more rate cuts. The president would like negative rates which is a sign of distress.

HARLOW: Yes.

ROMANS: And you have -- just you need to see coordinated global approach and targeted stimulus I think from the White House.

HARLOW: So --

ROMANS: Basically things like that.

HARLOW: To that point of targeted stimulus, because negative interest rates historically we have not seen those beneficial in Europe, in Japan. Do you want those economies? I don't think so right now. But targeted stimulus can work. Larry Kudlow said to me late last week about the fact that they're looking at more targeted stimulus but he didn't give a lot of details. Do you what that could entail?

ROMANS: So what economists are asking Washington to think of are -- well, several this morning are already discussing whether you're going to need an airline bailout because empty planes are flying right now, quite frankly. And you've seen travel really shrink and it's a real problem there.

Paid sick leaves, targeted bridge loans for companies that -- especially small companies that need help. There is a little bit of this in terms of healthcare response from the emergency funding we saw last week. But maybe -- and a couple of economists this morning tell me they'd like to see tariffs lifted for companies.

SCIUTTO: OK. That's company centric. Is there talk of things that would go directly to the consumers? Some folks raised the idea of a payroll tax cut, for instance, because that's money immediately -- ROMANS: Temporary --

SCIUTTO: In people's pockets.

ROMANS: Temporary tax cuts for consumers, yes, and also guaranteed paid sick leave. I've been banging this drum for two weeks. One of the reasons I'm convinced we have so many people die every year of seasonal flu is because people are not paid to stay home if they don't feel good.

HARLOW: Exactly.

ROMANS: So they spread it. And it's not their fault. It's just the way the system is.

HARLOW: Yes.

ROMANS: If you're going to tell somebody, if you feel bad, stay home. If you're making $18,000 a year and you live paycheck to paycheck and have two kids to feed, you're going to work.

SCIUTTO: Well, listen --

ROMANS: And that's going to spread the flu.

SCIUTTO: For some people there may be no choice. Folks don't have, you know, they may be reliant on daycare. For instance the daycare center is closed you can't go to work if you don't have a family structure.

ROMANS: And I think companies are going to be leaders here, too. Uber and Lyft have already said that if they have drivers, for example, who are told to stay home or have -- or on two weeks lockdown for coronavirus, they will pay them. You'll need to see more companies say the same.

HARLOW: Let's go back to the exchange. Christine, stay there.

So, Alison, for people watching and they see the market halted, right, the Dow is off 1884 points, down 7.3 percent, it stopped because trading stopped. The trigger was hit, the mechanism is in place to stop things for a little bit while you see a panic.

KOSIK: Yes, the idea is take a breath. I literally been asking some of these traders, what are you doing for the next 15 minutes? They said we're going to take a breath. Obviously you've got them behind me and all over, assessing their positions, trying to figure out what their move is going to be, and a little less than 15 minutes, when the market reopens, but clearly, this is panic trading in the markets, and this is fear-driven.

One trader coming up to me and saying this isn't real. Although, you know, we've got the panic in the oil markets, which set off this latest fear, it's just one more layer in addition to the coronavirus fears, and the, you know, unexpected impacts of the coronavirus on the global economy. So the oil markets plunging, the bond markets flashing a red signal about, you know, a possible global recession. It's all of that just together causing this fear in the marketplace,

and around me here, you can see the traders feverishly figuring out their next move when that market opens.

SCIUTTO: Thanks -- thank you, Alison Kosik. We're just crunching some numbers here to calculate what the market has dropped from its peak now. I believe the peak was close to 30,000, Christine Romans.

ROMANS: Yes.

SCIUTTO: We'll get you those numbers when we have it because that's what you really want to watch. You want to watch, you know, any given day, you can have ups and downs, and we've had a lot of downs, we should note, but let's look at the trend line. We'll get those numbers as soon as we have them.

HARLOW: Romans, talk to us about what you do when you already have a federal funds rate at, you know, 1.75 percent, 1.5 percent. When you don't have a lot of room to cut, are we talking about another QE, another quantitative easing? What do we do?

ROMANS: We've never been here, so we don't know. I mean, that's one of the reasons why markets are so unnerved. We don't know. We've never been here, near zero interest rates. There's two more rate cuts I think baked into the cake here, people are expected going to happen --

HARLOW: The market already knows that, right? They've priced that in.

ROMANS: Yes. So if that doesn't happen, it's going to be even worse. Look, I've heard people talk about how -- could there be another QE? Well, QE is really effective when rates aren't one.

HARLOW: Yes.

ROMANS: When you're buying -- you know, credit things off, out of the market.

[09:40:04]

There has been some discussion over the weekend from some people that I talked to about maybe the Fed has to have Congress broaden its mandate so it can buy stocks. What kind of a political fight would that be? And what do that say about where -- those are the kinds of conversations we've been having.

SCIUTTO: Well, and it raises the question, did the Fed set it up for this to some degree by being so loose throughout a market rise? And it takes away the leeway when things go down.

Listen, hold those thoughts. There are lots of questions here. We're going to bring you all the information, we have it, take a short break. We'll be right back.

(COMMERCIAL BREAK)

SCIUTTO: Markets in freefall, we're watching it closely. We have Alison Kosik.

[09:45:01]

She is down at the floor of the New York Stock Exchange, where traders are reacting. Let's find out what it means.

Alison, tell us what you're hearing.

KOSIK: I'm here with NYSE President, Stacey Cunningham.

Stacey, what should people be thinking, who are watching this, knowing that the markets have stopped trading?

STACEY CUNNINGHAM, PRESIDENT, NEW YORK STOCK EXCHANGE: People should understand that this is by design so we put market right circuit breakers in place to slow the market down, give investors an opportunity to digest information and react to it appropriately. The systems are designed this way and they're tested this way and they're evolved over time so that we're always making sure we have mechanisms in place and that we've learned from prior incidents. So people should understand this is working as it's supposed to.

KOSIK: The day is going to be a rough one. There could be another circuit breaker in place at 13 percent down.

CUNNINGHAM: It's possible the next circuit breaker would be 13 percent. But again the reason why we put circuit breakers in place is so that we can slow the market down and give investors an opportunity to react, absorb information, and recognize the fact that the markets are here for the long-term.

KOSIK: Market is going to be reopening in a little less than four minutes. What can we expect?

CUNNINGHAM: We'll see in four minutes. Right? I mean, what's important is that the -- you know, investors are reacting, the markets, I'm not sure exactly where they'll reopen.

KOSIK: Should Americans watching this be afraid?

CUNNINGHAM: Markets are here for the long term. If you think about the beginning of markets, they stop -- they start in the lower left corner of the chart and they extend up to the far right corner. It just isn't a straight line but it happens all the time. We've triggered market right circuit breakers in the past and we're here today with the Dow much higher at that level.

KOSIK: Hey, Stacey Cunningham, thanks so much for your time. She's got somewhere to go. I'll pass it back to you, guys.

HARLOW: Alison, we appreciate that. We're going to take a quick break. We'll be back with you in just a minute when the market reopens, we'll see what happens. Stay right here.

(COMMERCIAL BREAK) SCIUTTO: Welcome back. Trading has started again on the Dow. It stopped for 15 minutes. This is a circuit breaker built into the system to kind of calm things down as you have drops like this, and as it opens again, it continues -- well, it continues to fall.

[09:50:05]

We're joined again by Alison Kosik. She's on the floor. Christine Romans here.

Christine, folks at home.

ROMANS: Yes.

SCIUTTO: They're watching this. They're concerned. They're concerned about their savings, their retirement. They're concerned what it means for their job going forward. Put this into context for us.

ROMANS: Well, I mean, the last time I saw trading action like this, it was back in 2008. It was a really scary time. It was in fact exactly 11 years ago today that we began this bull market. So over time, these kinds of pullbacks and corrections, and if it becomes a bear market, it's not very far from there. These become long-term buying opportunities. But right now, this is a very nervous moment.

You've got oil prices moving violently. You've got stock markets moving violently. What we're showing you on your screen right now is the Dow, the 30 stocks in the Dow down more than 7.8 percent, making this one of the worst days percentage wise in the stock market since 2000. But the S&P 500 is the one that really matters. So that's 500 stocks and that's the one that if it goes too far too fast, they stop the trading.

HARLOW: Yes.

ROMANS: The next level for that one to be stopped is way at a 13 percent decline, not even close to that.

SCIUTTO: OK.

ROMANS: Not even close to that. But this just shows you sort of the real concerns about the risk to the global economy. Deutsche Bank this weekend downgraded its expectations for the U.S. economy in the second quarter to a contraction. The U.S. economy shrinking in the second quarter.

SCIUTTO: Wow.

ROMANS: Because of the coronavirus and unease about that. That was before the crash in oil markets. So everyone will be sharpening their pencils and going back and trying to see what kinds of different scenarios they're going to game up for the U.S. economy.

SCIUTTO: Notable, because it was just a week ago that Goldman Sachs, of course, made a splash by predicting zero percent growth in the second quarter. ROMANS: Yes.

SCIUTTO: Now you have a major bank that's looking at a negative territory.

HARLOW: So, Alison, you're at the exchange, we're off 7.5 percent on the Dow, but really we need to be focusing on the S&P 500, a much broader index. How far off are we from official bear territory being off 20 percent from the highs right now? Because that's really -- look at that. The Dow is off 2,000, the S&P reflecting a similar loss.

KOSIK: Look, we're quite a ways off from 20 percent. The next level we're looking at is 13 percent because if the S&P falls -- you know, a total of 13 percent from the overnight trade and then from the opening bell, that is when we can see another circuit breaker or measures taken into place to stop trading again.

As you said, we're looking at that Dow number, as well. It's incredible to see it fall 2,000 points, but we're really watching that S&P 500 level number. It's that level that we're watching to know whether or not measures will be put into place to stop trading.

ROMANS: The bear market level for the S&P 500 are down 20 percent from its recent peak is 2,708 points, so it has further to go to be an official bear market, but there certainly is this feeling that a correction, a 10 percent decline from the peak cap and very quickly, and now you're gunning for bear market levels, again very quickly.

I think reflecting really the unease about how much more the Fed can do. How slow the global economy will be. How fragile some of the European and Asian economies are. Look, the financial system is dealing with something that's really interesting here. The broken supply chains for companies mean potentially hundreds of billions of dollars of bills that won't be paid from companies.

HARLOW: Yes.

ROMANS: They will draw on their lines of credit, which means the banks are going to be on the hook for making sure that these bills can be paid. That's one of the reasons why the New York Fed today injected some liquidity to make sure there's enough oxygen in the banking system.

SCIUTTO: And this is the thing we're trying to focus on here, is the coronavirus outbreak here in the U.S. and around the world, what real economic effect it's having.

HARLOW: Yes.

SCIUTTO: What is it stopping, what kind of trade, travel, et cetera.

HARLOW: Mohamed El-Erian is on the phone, and I'm so glad he is. He is the chief economic adviser at Allianz. He used to run PIMCO. And he is the author of the book, "The Only Game in Town: Central Banks Instability and Avoiding the Next Collapse."

This is your ballgame, Mohammed. Please tell Americans what they need to hear this morning.

MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ: So they need to hear that this is a very unsettling environment, and for good reasons. We have lost three anchors at the same time. And we've been taken out of our comfort zone, but we should not panic. We have lost the anchor of improving economy because the coronavirus is destroying both demand and supply at the same time. And we are amplifying that by fear.

We are losing, as you just cited, the anchor of policies because we are losing trust in the ability of the Federal Reserve to save us yet again. And finally, we are losing market anchors, technical issues that most Americans don't look at but people like me focus on. And when you lose that, you get massive air pockets.

HARLOW: Yes.

SCIUTTO: When folks at home watch this, what kind of relief should they be demanding here?

HARLOW: Yes.

SCIUTTO: What does -- you know, there's been a lot of talk about interest rate cuts. They're already very low. There's been talk about stimulus. What needs to be done, in your view?

[09:55:05]

EL-ERIAN: So sequentially, first and foremost, we need to focus our resources on the two things that will help us form an economic bottom. An economic bottom is critical. You need a floor. One is medical advantage that helps us contain and predict this virus, and two, medical advances again, hopefully through a vaccine that allows us to increase immunity. That is critical.

Second, we need very targeted measures to contain financial dislocations and to protect the poorest and the most vulnerable in our population.

HARLOW: Yes. That is --

EL-ERIAN: And finally, we need to put all this in a whole government approach. This is not each agency doing its whole thing. You need a whole of government approach that has a layer of global policy coordination. The coronavirus is a global problem, and we need collective action.

SCIUTTO: And we need honest talk.

HARLOW: Yes. Yes.

SCIUTTO: We need honest talk.

HARLOW: Not politics.

Mohamed, we're so grateful for you. Stay close. We'll need your expertise through all of this. We appreciate your time this morning. SCIUTTO: We are watching the markets this morning. We'll have much

more in a short time. Please stay with us.

(COMMERCIAL BREAK)