The blackest of Mondays
The Oct. 19, 1987, crash reduced U.S. stock values by $1 trillion
NEW YORK (CNNfn) - The Oct. 19, 1987, stock-market crash stunned Wall Street professionals, hacked about $1 trillion off the value of all U.S. stocks and elicited predictions of another Great Depression.
On "Black Monday," the Dow Jones industrial average plummeted 508 points, or 22.6 percent, to 1,738.74. It was both the largest one-day point and percentage loss ever for the blue-chip index.
The broader markets followed the Dow downward. The S&P 500 index lost more than 20 percent, falling 57.86 to 224.84. The Nasdaq Composite index dived 46.12 to 360.21.
No Dow components emerged unscathed from Black Monday. Even market stalwarts suffered massive share losses. IBM shed 31-3/4 to close at 103-1/3, while USX lost 12-1/2 to 21-1/2 and Eastman Kodak fell 27-1/4 to 62-7/8.
The crash splattered technology stocks as well. On the Nasdaq, Apple Computer lost 11-3/4 to close at 36-1/2, while Intel dropped 10 to 42.
Stocks descended quickly on Black Monday, with the Dow falling 200 points soon after the opening bell to trade at around 2,046.
Yet by 10 a.m., the index had crept back up above 2,100, beginning a pattern of rebound and retreat that would continue for most of the day.
Later, with 75 minutes left in the trading day, it looked like the Dow would escape with a loss of "only" about 200 points.
But the worst was yet to come.
Starting at about 2:45 p.m., a massive selloff began, eventually ripping 300 more points off of the Dow.
At the closing bell, the Dow appeared to have suffered an amazing loss of about 400 points.
However, heavy volume kept the New York Stock Exchange's computers running hours behind trading. Only about two hours later would investors realize that the day's total loss exceeded 500 points.
Reaction to the crash varied from sentiments that the market was due for a correction to feelings of outright despair.
"I knew that in the past that these financial panics had often triggered far worse consequences," said PaineWebber investment strategist Mary Farrell. "I was actually less concerned about the market than the potential for collapse of the world financial system."
Others, however, were less apocalyptic.
"I wasn't really worried about it," said Michael Metz, chief investment strategist at Oppenheimer & Co. "Maybe I should have been, (but) I thought it would all blow over, and didn't see it as a catastrophe."
After markets closed, players began to discuss what had happened -- and what would occur next.
Black Monday's 508 point loss for the Dow -- coupled with the previous Friday's 108.35 point loss -- led some to suggest that markets remain closed on Tuesday.
Others sought news from the overseas markets for any information that could provide some insight into what course to take.
President Ronald Reagan sought to reassure investors, saying: "All the economic indicators are solid. There is nothing wrong with the economy." QuickTime movie (1.5 MB)
And the day after the crash, Federal Reserve Chairman Alan Greenspan gave an unusually lucid one-sentence statement indicating the Fed would provide sufficient funds to banks, allowing them to provide credit to securities firms.
"The Federal Reserve, consistent with its responsibilities as the nation's central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system," the statement said.
The New York Stock Exchange did end up opening for business as usual on Oct. 20, and the Dow rose 102.27 -- its largest one-day gain ever up to that time -- to close at 1,841.01.
But making up the full extent of Black Monday's losses would take longer.
The Dow only returned to its pre-crash levels in January 1989, 15 months after Black Monday. The broader S&P 500 index took 21 months to fully recover.
Yet today, Oppenheimer's Metz sees the crash as just another episode in the life of a perplexing stock market.
Says Metz: "I more and more believe that very often the market is in a world of its own."
-- Randy Schultz