It’s a day that has became known as Black Monday and for good reason. A quarter century ago – on Oct. 19, 1987 – the U.S. stock market suffered its biggest one-day drop in history.
The Dow Jones industrial average swooned 508 points, or 22.6 per cent, leaving investors stunned and shaken, while triggering a worldwide rout in equity prices. Toronto stocks fell in sympathy, but only about 11 per cent, or half the decline seen on Wall Street.
(Photo: A Toronto Stock Exchange trader at the end of the day on Black Monday.) (TIM CLARK/The Canadian Press)
Such a point drop might not seem so large now, with stock prices much higher, but in percentage terms it would be equivalent to a plunge of more than 3,000 points in today’s Dow. U.S. stocks had also sagged 9 per cent the preceding week, further unnerving investors who had lost nearly a third of their nest eggs in almost the blink of an eye.
(Photo: Traders at the New York Stock Exchange on Black Monday.) (PETER MORGAN/The Associated Press)
At the time, the drop had an eerie resemblance to the beginning of the Great Depression. The stock market panic of October and November, 1929, was the opening act of the Dirty Thirties, and here was a one-day drop that exceeded even the worst daily decline back then.
(Photo: The NYSE on Black Monday) (PETER MORGAN/The Associated Press)
As the day’s swoon gathered momentum, margin calls on investors who had lost money led to a vicious circle of forced selling and even greater carnage. Exchanges couldn’t keep up with the volume of trading, leaving investors in the dark as to their losses. As sell orders poured in, many were so-called market orders – or instructions to liquidate at any price – and stock values gapped downward.
(Photo: Paper flies through the air as trading closes at the Toronto Stock Exchange on Black Monday.) (TIM CLARK/Canadian Press)
A trader on the floor of the Toronto Stock Exchange on Black Monday. (Fred Lum/The Globe and Mail)
Crowds gather outside the New York Stock Exchange on Black Monday. (PETER MORGAN/The Associated Press)
U.S. newspaper headlines from Oct. 20, 1987 -- the day after Black Monday.
After Black Monday, stock exchanges figured they had better find ways to curb such collapses and instituted circuit breakers, or trading pauses, when there are large declines. On the Dow, trading would now stop for up to an hour on a decline of 10 per cent. (The Associated Press)
The front page of Report on Business on Oct. 20, 1987. (The Globe and Mail)