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Black Monday 1987


In the history of the stock market, there are specific dates that will live in infamy. One of the more recent days that many investors still remember is Black Monday 1987. This day was when the Dow Jones Industrial Average dropped a total of 508 points in a single day. Monday, October 19, 1987 started on a wrong foot in Hong Kong and turned into a devastating moment for the United States stock market. Total value of the stocks within the market tumbled 22.61 percent within a single day of trading. This would lead to a month long investment decline that would take two years to recover.

While there is some disagreement toward the actual cause of Black Monday Oct 19 1987, the integration of computer technology was a likely culprit. With the increased speed that computers offer to the value of a stock, it can quickly change the opinion that many investors hold toward various stocks. With valuations of many stocks changing in a rapid fashion, many individuals began selling off their shares in a panicked manner. This form of influence on the psychology of the market can prove to be more harmful than the losses realized. Some experts do feel that some stocks were valued too high which may have also contributed to the crash.

Leading up to the crash on Black Monday 1987, the United States economy was undergoing some changes. With recovery efforts slowing, the stock market started showing signs of slowing rapid growth later in the year. By August of 1987, the market was up 44 percent from its closing value in 1986. This rapid increase in value led to the first of a downturn on October 14, when the first major drop was noted. As the week progressed, each day saw more losses within the value of the market.

With a full weekend to worry about the falling market prices, Black Monday 1987 saw a major loss of value. With some military crisis occurring in the Persian Gulf, many of the Far Eastern markets began to tumble. These events impacted other markets throughout the world that led to a global economic predicament. Simple speculation by some turned into lost profits for many. The effects of technology and the human influence in the market value were more apparent than ever. While the true cause of the market crash of October 19, 1987 may never be fully realized, it has helped gain better understanding of how the stock market works.