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Dow's drop sparks curbs
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October 27, 1997: 6:30 p.m. ET
So-called 'circuit breakers' never before activated by market's plunge
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NEW YORK (CNNfn) - The Dow Jones industrial average dropped more than 550 points Monday, sparking unprecedented trading halts on the New York Stock Exchange.
The plunging Dow triggered so-called "circuit breaker" rules adopted in 1988 to forestall repeats of the the October 1987 crash.
The rules had never been activated prior to Monday.
The first "circuit breaker," which halted trading for 30 minutes, was triggered at 2:36 p.m. ET Monday after the Dow fell 354.37 points, or 4.6 percent, to 7,361.04.
However, after trading resumed at 3:06 p.m., selling continued to knock stock-market indexes even further down.
Within minutes, the Dow plummeted a total of 554.26 points for the day to reach 7,161.15, triggering a second trading curb -- the most severe on the rule books.
That circuit breaker calls for halting trading for one hour whenever the Dow drops 550 points.
But since Monday's plunge triggered the second circuit breaker less than one hour before the market's scheduled 4 p.m. ET close, the rule's activation effectively canceled the rest of the day's trading.
Markets are scheduled to reopen as usual at 9:30 a.m. on Tuesday.
The Nasdaq and the other major stock exchanges followed the NYSE's lead and activated trading curbs in the afternoon.
Still, all major stock exchanges posted huge losses. Collectively, U.S. stocks lost $663 billion in market capitalization.
The White House appealed for calm in the U.S. markets. (304K WAV) (304K AIFF)
Some traders, seeking relief from plunging prices, cheered as the NYSE triggered the 350-point circuit breaker. (2.1M QuickTime Movie)
However, other investors apparently felt crippled by the inability to modify their positions.
Stock-market strategists said that while the trading curbs' enactment represented historic news, the event wouldn't likely fuel further panic.
"Even if a trading halt were put in, it might be 'something to do about nothing,'" said Alan Ackerman, market strategist at Fahnestock & Co. "This is an orderly drop, rather than one filled with panic."
Yet many investors perceived the U.S. sell-off -- which many attributed to the problems plaguing the Asia-Pacific markets -- as serious.
"I don't see how 500 points can be very orderly," said Michael Kassan, fund manager at Neuberger & Berman. "Is the world a hell of a lot different than it was three or four weeks ago? No. The problem is, (stocks) have almost gone straight up (in recent months)."
-- Robert Liu
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