When Andrew Brooks, T. Rowe Price's top equities trader, arrived in his Baltimore office at 7:30 a.m. Wednesday, it looked like it was going to be a bad day for stocks. European markets were down, and fears of war or a terrorist attack were weighing on investors.
That all changed with a phone call. "Did you hear Osama bin Laden was captured?" a client asked Brooks. Then he saw online that the British Broadcasting Corp. was carrying the report. U.S. stock markets hadn't opened yet, but stock futures _ bets on how stocks would perform _ were surging.
Brooks had to figure out whether to make his own bet on the rumor.
"The BBC is reputable," he said. "I figured it was credible."
He sat it out and was glad he did: Markets reversed course shortly afterward, when it emerged that the BBC had been relaying an unconfirmed Iranian radio report, and after officials in the United States, Afghanistan and Pakistan denied they had bin Laden in custody.
"We went through a lot of mental anguish," Brooks said. "The rumors are making these very tough times."
The tale was one of dozens sending the markets gyrating in recent days, as Wall Street's storied rumor mill, supercharged on new communications technology, meets the prospect of war. Last week, markets seesawed with another report of bin Laden's capture. Before that, traders across the country were e-mailing one another about an enemy submarine prowling through New York Harbor.
"The statistics don't mean anything lately," said George Siegrist, a veteran energy trader at the New York Mercantile Exchange. "It's all about the war now. B.S. moves us 30 cents. Confirmed stories move us a dollar."
Traders lately are loath to take a break because of what might come through the rumor mill while they're gone, said Kevin McDonnell, an exchange board member and energy trader: "When the market is so volatile, any little story causes a big reaction."
"Since the World Trade Center attack, my attitude has changed," said McDonnell, who witnessed the Sept. 11 disaster as he evacuated his offices across the street from the twin towers. "Anything is possible. Was there a submarine in the New York Harbor? I think not. But who knows?"
The commodities markets are particularly sensitive to rumors right now, because of the direct impact that war or a terrorist attack could have on oil supply and on energy prices.
"In my 19 years, I have never seen rumors like this," said Michael Hiley, ABN Amro's vice president of Global Energy Futures, who brokers bets by big energy companies and other clients on the direction of natural gas and oil prices.
"I'm not going to send out an e-mail to customers saying that there are rumors that Osama bin Laden's been caught," he said. "But you'll mention it in informal conversation."
Wall Street's rumor machine heated up Feb. 21, when an Exxon Mobil Corp. gasoline barge exploded at 10:10 a.m. off Staten Island. At Merrill Lynch offices across the harbor in lower Manhattan, "someone said they heard the Statue of Liberty was bombed," said Henry Mulholland, a Merrill managing director in charge of trading stocks listed on the New York Stock Exchange.
Walking to the window, he saw the thick black smoke billowing past the windows.
"It was scary," he said. "I didn't know if I would turn the corner and see the head blown off the Statue of Liberty."
The statue was intact. But he still had no idea where the smoke was coming from.
"I don't ever spread rumors," Mulholland said. "But I had to tell my clients that something was going on."
He and his staff called and sent electronic messages to clients, explaining what they knew.
By then, major television networks and news Web sites were reporting that a gasoline refinery had exploded on Staten Island. Instantly, terrorism rumors began spreading: Did someone bomb a refinery to cut into the nation's energy supply?
Investors didn't wait for an answer, dumping their stocks on fears that the United States could be facing more terrorist attacks. In a half hour, the Dow Jones Industrial Average fell 100 points, the Russell 2000 Index of small stocks slid almost 1 percent. Bonds fell, gas soared and mortgages slipped.
"We heard by about 10:15 that there may be some terrorist activity tied in with an oil barge," said Don Bright, director of Bright Trading, a chain of 40 day-trading offices with 700 independent traders.
From the firm's Las Vegas headquarters, Bright sent a message through an online chat room called "Pal Talk" to some of his traders, saying, "Be aware. Cancel your bids for a second. Hold back."
A few "news junkies" in each office made calls and combed the Internet and newswires to find out what was going on, he said.
Markets turned up once it was clear that the fire wasn't an act of terrorism and was on a barge, not in a refinery. Bright says some of his traders profited from the sharp moves.
"The current rumor mill is a day-trading paradise," he said. "Every time they have Hans Blix on television, the markets move one way or another and we make money."