1987 crash - what happened

"Stocks Plunge 508 Amid Panicky Selling; Percentage Decline Greater Than in 1929

The stock market crashed yesterday."

"...Panic driven trading on the New York Stock Exchange reached 604.3 million shares, nearly double the prior record volume of 338.5 million shares set last Friday, when the Dow plunged a then-record 108.35 points."

- Wall Street Journal, 10/20/87

On October 19th, 1987 the stock market crashed. The DJIA closed down 22.6% for the day. A similar drop in today's market would equal approximately 1800 points. Volume was an unbelievable 604.3 million shares, almost double the previous record of 338.5 million shares set on the previous Friday. The DJIA was down 36.7% from its closing high less than two months earlier.

The selling started right from the open. 11 of the 30 stocks in the Dow Jones Industrials did not open for the first hour due to order imbalances - there were so many sell orders they could not be matched to buy orders. With many stocks on the NYSE not trading due to order imbalances, traders turned to the futures markets to cover their positions:

Chicago- The panic began here.

An eerie quiet settled over the teeming stock-index futures pit at the Chicago Mercantile Exchange early yesterday as traders watched the beginning of the worst washout in stock-market history

With trading delayed in many major New York Stock Exchange issues because of order imbalances, Chicago's controversial "shadow markets" -the highly leveraged, liquid futures on the Standard & Poor's 500 stock index- were, for just a few minutes, the leading indicator for the Western world's equity markets.

And the stock-index markets were leading the way down - fast. In a nightmarish fulfillment of some trader's and academician's worst fears, the five-year-old index futures for the first time plunged into a panicky unlimited free fall, fostering a sense of crisis throughout the U.S. capital markets.

- Wall Street Journal, 10/20/87

The language of Wall Street is numbers, so perhaps these numbers can tell the story best:

October 19, 1987
Index	Closing Price	Net Change	% Change
Dow Jones Industrials	1738.74	-508.00	-22.6%
Dow Jones Transports	776.87	-164.78	-17.5%
Dow Jones Utilities	160.98	-29.16	-15.3%
NYSE Composite	128.62	-30.51	-19.2%
SP 500 Index	224.84	-57.86	-20.5%
NASDAQ Composite	360.21	-46.12	-11.4%
Value Line	211.74	-37.73	-15.1%
Wilshire 5000	2310.29	-503.18	-17.9%

A look at the market internals for the day shows similar devastation in the market:

**New York Stock Exchange**
Advancing issues	52
Declining issues	1,973
Unchanged issues	56
New highs	10
New lows	1,068
Advancing volume (000's)	1,129
Declining volume (000's)	602,781

**NASDAQ**
Advancing issues	137
Declining issues	3,573
Unchanged issues	1,152
New highs	10
New lows	1,315
Advancing volume (000's)	4,763
Declining volume (000's)	201,077

How can the market change so dramatically in eight weeks? How can a seemingly invincible market unravel into panic in such a short time? It has been 10 years since the the 1987 Crash, and the story is just as dramatic as it was 10 years ago...