It was a crisp Monday morning in New York — October 19, 1987. Coffee carts clattered along Broad Street, steam curling into the cool autumn air.
Traders in tailored suits hurried past, briefcases in hand, swapping weekend stories and grumbling about the Yankees. Everything felt ordinary — another day of deals, trades, and ringing phones.
But by sunset, the New York Stock Exchange would be drowning in cigarette smoke, slammed phones, and stunned silence. Traders would stare at their glowing green-and-red screens as if they’d seen a ghost.
By the closing bell, this ordinary Monday would be branded forever as Black Monday — the single worst one-day percentage drop in Dow Jones history.
📉 The numbers?
- Dow Jones fell 508 points in a single session.
- That’s a 22.6% collapse — gone in just hours.
In today’s terms, that’s like losing over 7,000 points between your morning coffee and evening commute.
💣 The Long Fuse Before the Explosion
Crashes never appear out of nowhere. In the mid-80s, the market was flying high — maybe too high.
From 1982 to August 1987, the Dow more than tripled. The Reagan era promised tax cuts, deregulation, and pro-business policies. Corporate takeovers were the rage. Margin trading became a lifestyle.
Yet beneath the champagne bubbles, warning lights were flashing:
1️⃣ Interest Rates Were Creeping Up
The Federal Reserve, worried about inflation, started nudging interest rates higher. Loans became costlier, bonds more tempting, and big money started quietly pulling away from equities.
2️⃣ The Dollar Was Slipping
The 1985 Plaza Accord — meant to weaken the U.S. dollar — worked too well. By 1987, the dollar’s steep slide scared foreign investors into reconsidering their U.S. positions.
3️⃣ Global Tensions
Oil prices jumped. Rumors swirled about Middle East trouble. And if there’s one thing investors hate, it’s uncertainty.
⚡ The Spark Nobody Expected: Program Trading
Enter the new player: computers.
Big institutions were testing a strategy called portfolio insurance — designed to automatically sell stock index futures if markets started to fall, theoretically limiting losses.
The problem? Computers don’t hesitate. No gut check. No pause.
On Black Monday, once prices dipped, automated systems flooded the market with sell orders. Prices fell faster, triggering more selling — a self-reinforcing loop.
Like a fire alarm that doesn’t just warn you — it sets the building on fire.
🕰 October 19, 1987 — Hour by Hour
⏰ Morning — 9:30 AM
The bell rings. Dow slips nearly 100 points in the first 30 minutes. Not ideal, but not unprecedented. Specialists try to steady the market, but sell orders pile up faster than buyers can take them.
⏰ Midday — 12:00 PM
The decline accelerates. Some stocks don’t even open on time due to the backlog. The ticker shows jagged drops, skipping prices entirely.
⏰ Afternoon — 2:00 PM
Panic rules. Phone lines to Chicago futures markets jam, hedging becomes impossible. Portfolio insurance programs dump stocks at full speed. Traders call it “selling with no floor.”
⏰ Closing Bell — 4:00 PM
The Dow closes at 1,738.74, down 508 points from Friday’s close. More than $500 billion in market value is erased — in one day.
😔 The Human Cost
It wasn’t just numbers on a screen — it was chaos in the flesh.
Shouting over the roar of the crowd. Paper orders everywhere. The metallic clatter of ticker tape.
Some brokers looked like they had aged years in hours.
“I’ve been wiped out. There’s nothing left,” one client said flatly over the phone.
Others kept their voices calm while their hands shook.
🌍 When America Sneezed, The World Caught a Cold
Black Monday rippled worldwide:
- 🇭🇰 Hong Kong: -45.8%
- 🇦🇺 Australia: -41.8%
- 🇬🇧 United Kingdom: -26.4%
- 🇨🇦 Canada: -22.5%
Markets abroad opened after the U.S. collapse — and fell in one gut-wrenching lurch.
🔍 Why It Really Happened
Economists still debate the exact mix, but the cocktail of causes included:
- Overheated markets after years of rapid gains.
- Higher interest rates making bonds more appealing.
- Portfolio insurance accelerating sell-offs.
- Overwhelmed trading systems unable to keep up.
- Panic psychology — fear spreads faster than facts.
🛠 Picking Up the Pieces
The recovery was surprisingly quick. Within two years, the Dow was back to pre-crash levels.
The Federal Reserve stepped in fast, injecting cash and pledging support.
Rules changed too:
- Circuit breakers to pause trading during extreme swings.
- Program trading reforms to limit cascading sell orders.
- Better communication between stock and futures markets.
📚 Lessons That Still Matter
Black Monday taught us:
- Technology can amplify mistakes beyond human control.
- Market sentiment can reverse in seconds.
- True insurance isn’t code — it’s risk management.
Most of all, it showed that markets are part logic, part emotion, part raw fear. On October 19, 1987, that balance broke — and the invisible glue of confidence dissolved in a single day.