IN OCTOBER of 1987, the stock market crashed unexpectedly, causing economic instability around the world.
The sudden crash is referred to now as Black Monday.
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What is Black Monday?
Black Monday is the name given to the stock market crash on October 19, 1987.
At the time, 23 major world markets experienced a drastic decline.
When measured in USD, eight markets declined between 20 to 29 percent, while three declined between 30 to 39 percent – Malaysia, Mexico, and New Zealand.
In Hong Kong, Australia, and Singapore, the market declined by more than 40 percent.
Austria experienced the smallest decline, with a drop of 11.4 percent. Hong Kong was the most severe, their market dropping by 45.8 percent.
Worldwide losses at the time were estimated to be around $1.71trillion in USD.
Many believed Black Monday would launch a second Great Depression.
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How did Black Monday affect the United States?
Between August of 1982 and 1987, the Dow Jones Industrial Average had risen from 776 to 2,722.
At the time, the average number of shares traded on the New York Stock Exchange rose from 32million to 181million shares.
Just days before Black Monday, the United States House Committee on Ways and Means introduced a tax bill meant to reduce the tax benefits associated with financing mergers and buyouts.
On Wednesday, October 14, 1987, the United States Department of Commerce announced high trade deficit figures had a negative impact on the value of the dollar, raising interest rates and lowering stock prices.
Dow Jones dropped by 95.46 points, dropping another 58 points the next day.
The Friday before Black Monday, Dow Jones fell by another 108.35 points.
When Monday came around and the stock market reopened, Dow Jones fell by 508 points.
This triggered crashes in futures exchanges and options markets, and was the largest one-day percentage drop in the history of Dow Jones.
Of over 2,000 New York Stock Exchange stocks, 195 saw trading delays and halts throughout Black Monday.
Computers became overwhelmed with the total trading volume, delaying orders even more.
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What is the Dow Jones Industrial Average?
The Dow Jones Industrial Average, also known simply as Dow Jones, is a price-weighted measurement stock market index of 30 prominent companies within the stock exchanges of the United States.
Dow Jones was first calculated on May 26, 1896, by Charles Dow, the co-founder of both The Wall Street Journal and Dow Jones & Company.
He worked with his business associate, Edward Jones, to establish the market measurement.
