Although the Dow Jones Industrial Average (DJIA) shed 588 points by the markets close on Monday August 24 due to contagion from the Chinese stock market, it is far from the worst single day drop for the index. There are a number of worse days that traders could have been in the market. Traders presents examples that makes the recent market shock pale in comparison.
Whether you believe U.S. regulators single shooter theory, that a single trader was responsible for the Flash Crash or not, it demonstrated the unintended consequence of the SECs Regulation National Market Structure. Within approximately half an hour, the Dow Jones Industrial Average dropped 998.5 points, or roughly 9% before regaining most of its loss. The SEC has since remediated the issue through the induction of circuit breakers that should provide the market with necessary breathing room.
The financial crisis bear market official kicks off with DJIA dropping 150 points as the price of a barrel of light sweet crude reaches a historical high of $140.12. Analysts at the time attribute the fall to the US dollars weakness against the Euro.
The DJIA drops 504.48 points on news that Lehman Brothers filed for bankruptcy and Merrill Lynch sold itself to Bank of America. Meanwhile stock in American International Group dropped 60%, opening at 7.12 and closing at 4.76, on fears of possible failure due to its credit derivatives positions.
Wall Streets irrational love affair with Internet companies begins to cool as tech-heavy Nasdaq Composite closes at 5,048.62 for the first time. Over the next two and a half years the index fell to a low of 1199.62 and wouldnt surpass its original high for 15 years. Now, a moment of silence for some of the bubbles victims Pets.com, Webvan, WorldCom and many, many others.
An unsuccessful leveraged buyout buy the parent company of United Airlines, UAL, sent the DJIA down 190.58, or approximately 6.9%, and the Nasdaq Composite down 14.9 points, or approximately 3%, by end of trading. Besides being the death knell for the junk-bond market, it signaled the beginning of the 1990s recession.
Black Monday is the first time that Wall Street could blame a market crash on technology. Computerized program trades executing arbitrage and portfolio-insurance strategies drove the DJIA down 1,508 point to 1,738.74, or a 22.68% drop by closing. Some brokers compounded the troubles by seeking refuge in Harrys Bar in Hannover Square rather than picking up their phones.
Trading volume overwhelmed stock traders at New York Stock Exchange to the point where the ticker was not able to finish reporting floor transactions until 5:59 pm, two hours after the markets closed, reported the Wall Street Journal the following day. This lack of real-time information drove the DJIA down 34.95 points, or approximately 5.7% and second largest point decline up until then. The SEC also determined that specialists had not met their requirements of maintaining a fair and orderly markets in major blue chip stocks. At no time during the day did the specialist intervene in sufficient volume to slow the rap detonation in the market of IBM, the regulators report concluded.
Black Thursday remains the grandfather of all stock market crashes.
