Todd Nagel, who trades stocks full time in downtown San Francisco, dismissed Wall Street's biggest news on Tuesday. So unbound was he to the development -- the earnings report from Cisco Systems, an ostensible market bellwether -- that shortly after the New York markets had closed, he turned off his computer and headed home for the day.
After all, Nagel had already got what he wanted out of the market that day: Volatility. Piles of it.
"It creates opportunity. You want to see orders flow -- lots of buyers and sellers coming in," said Nagel, 38, who trades for his own account in a Bright Trading office. As for Cisco, he said: "I really wouldn't pay any attention."
Along with corporate scandals and painful losses, the summer on Wall Street has been characterized by unusual volatility. A key measure of market volatility surged in late July to its highest level since the 1987 crash and has been sustained for a period last matched after the Sept. 11 attacks and the collapse of Long-Term Capital in 1998. To some, the extraordinary volatility is an indicator that the market will soon turn.
Across the world, though, traders are trying to find their place and a rhythm in what professionals are referring to as a "trader's market."
Because of the uncertain market outlook, long-term investors have been wary of adding to their stock holdings. But Nagel and professional day traders, a number greatly depleted by the collapse of the bull market, prey on the wild swings, trying to capture a dime here or a nickel there on trades of 100 shares to several hundred thousand shares. Traders of stocks at big firms -- like Merrill Lynch or Charles Schwab -- say they too can take advantage of the mercurial movements, though they do not find volatility inherently good.
The action does not play as well among smaller investors, people who follow the market from a home office and who still trade -- though not as feverishly as they did in the dot-com boom. These people wait for the news on the economy, Cisco and other companies that may indicate a change in the market's momentum, looking for signs of stability and direction. Where will the market go? Will it turn positive again? Will it become easier to make a quick buck?
Interviews and phone conversations this week with a variety of traders, from people who manage their own retirement money and full-time traders to big-time money managers, show how Cisco's announcement was anticipated and processed and at times even disregarded.
Though Cisco turned in a good performance late Tuesday and its stock rose 14 percent over the last two days, its chief executive said he remained concerned about business at the service providers in the telecommunications industry. When trading resumed on Wednesday, the phone stocks had the biggest decline in the Standard & Poor's 500-stock index. Overall, stock prices rose.
Small-fry and part-time investors, though, find not just the bear market disconcerting, but also the volatility that has accompanied it of late. Thomas J. Petrarca, 45, who lives in Woodbury, Connecticut, says he made 50 to 100 trades a week during the dotcom boom.
This market has changed him. Now he makes perhaps 20 trades a week, sometimes fewer, and he and his business partner spend more time making investments in, and helping run, private startup companies. He has a 4-inch-thick black binder of the trades he placed during 2000; this year's binder is not yet an inch thick.
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