Stock Market Crash of 1987

Stock Market Crash of 1987

The Stock Market Crash of 1987

Black Monday - 1987 Stock Market Crash

On Monday, October 19, 1987, the Dow Jones Industrial Average fell to 1738 points from 2246 points, triggering a reduction in the value of all U.S. outstanding stocks and earning that fateful day the unenviable title of Black Monday.

But while much attention is paid to October 19 because of the harrowing situation, October 1987 in general was a trying period, as key stock indexes lost over 30 percent of their value in the U.S.

The response was quick and decisive as the U.S. central bank and the Fed stepped forward to help during this event. Experts believe that it was the quick thinking on the part of the two aforementioned entities that enabled both the Dow and the S & P which had fallen to 225.06 points from 282.7 points on Black Monday to regain their lost value within 24 months. The relatively quick recovery eliminated the very serious possibility of a recession.

There would be no repeat of the sorrowful recession that followed the 1929 crash.

The stock market crash of 1987, according to some reports, signaled the end of a five-year bull market. But the market proved to be more resilient following the crash of 1987 than it had been following the crash of 1929. The day after the crash of 1987, for instance, the market posted a record single-day gain of 102.27.

Many explanations have been given to account for why the stock market crash of 1987 occured, but none of them provide a full explanation for the happenings on that blackest of Mondays. Also confounding to some experts is how soon the markets rallied following a serious setback.

A number of changes were introduced after the 1987 debacle. For instance, more stipulations were applied to program trading.which involves computers programmed to automatically order stock trades whenever certain marketplace conditions are present. Currently, if the Dow drops more than 250 points in a day, program trading is prohibited to provide enough time for dealers and brokers to touch base with their clients.

At the end of the day, however, many believe that if the 1987 crash had one positive impact it was that it warned the powers that be, yet again, that market discipline is necessary.