The Black Monday Numbers
- -508 points — Dow Jones fell from 2,246 to 1,738
- -22.6% — Largest single-day percentage decline in history
- $500 billion — Market value erased in 6.5 hours
- 604 million shares — Record trading volume
- Markets worldwide crashed simultaneously for the first time
The Morning Nobody Saw Coming
It was supposed to be a normal Monday.
On October 19, 1987, traders walked into the New York Stock Exchange expecting another volatile week. Yes, the market had dropped 9% the week before. Yes, there was tension in the air. But nothing — absolutely nothing — prepared them for what was about to happen.
The opening bell rang at 9:30 AM. Within the first hour, the Dow was down 100 points. Phones started ringing off the hooks. Sell orders flooded in from everywhere — institutional investors, pension funds, individual traders.
"I've been in this business 30 years, and I've never seen anything like this. It was like someone pulled the plug on the entire market."
— NYSE Floor Trader, October 19, 1987
By noon, the Dow was down 200 points. By 2:00 PM, 300 points. The selling wasn't stopping. It was accelerating. And then came the moment that changed everything...
The Panic Point
At 2:45 PM, rumors spread that the NYSE would halt trading. Instead of calming markets, this triggered an even more violent selloff.
How Did We Get Here?
Black Monday didn't appear out of nowhere. The market had been running hot — too hot — for years.
From August 1982 to August 1987, the Dow Jones had risen from 776 to 2,722 — a gain of 250% in just five years. Everyone was making money. Everyone was a genius. And everyone forgot that trees don't grow to the sky.
The Bull Run
5 years of almost uninterrupted gains created massive overconfidence
Trade Deficit
US trade deficit hit record highs, weakening the dollar
Rising Rates
Interest rates were climbing, making bonds more attractive than stocks
But the real killer wasn't fundamentals. It was technology. For the first time in history, computers were making trading decisions at scale.
Welcome to the era of Program Trading — where algorithms could crash markets faster than humans could react.
The Machines Take Over
In the 1980s, Wall Street discovered a new toy: Portfolio Insurance.
The idea was elegant. Instead of selling stocks when markets dropped, you'd use computer programs to automatically sell futures contracts. This would "hedge" your portfolio against losses. Simple, right?
The problem? Everyone was using the same strategy.
The Feedback Loop from Hell
Stock drops → Computers sell futures → Futures drop → Triggers more selling → Stock drops more → More computer selling → REPEAT UNTIL ZERO
By some estimates, portfolio insurance programs controlled $60-90 billion in assets. When the market started falling on that Monday morning, all those programs triggered simultaneously.
"We had created a machine that could destroy the market. And on Black Monday, that's exactly what it did."
— Wall Street Analyst, 1987
The selling fed more selling. Humans couldn't keep up. Some stocks simply stopped trading because there were no buyers at any price.
Hour by Hour: The Longest Day
Here's how October 19, 1987, unfolded on the trading floor:
The Opening Bell
Market opens with massive sell orders. Dow drops 67 points in first 30 minutes. "Something's wrong" whispered across the floor.
Panic Begins
Dow down 100+ points. Phone lines jammed. Individual investors can't reach brokers. Some stocks not trading at all.
The Abyss
Dow down 200 points. SEC considers halting trading. Rumors fly. Fear becomes terror. Sellers at ANY price.
Free Fall
Dow down 300 points. Trading systems overwhelmed. Specialists running out of capital. The floor is chaos.
The Darkest Hour
Dow crashes through 400-point loss. Major market makers stop answering phones. Is this the end of capitalism?
Closing Bell
Final damage: -508 points. -22.6%. $500 billion gone. Traders stand in stunned silence. Then the real fear begins: What about tomorrow?
Global Meltdown: The World Catches Fire
Black Monday wasn't just an American disaster. For the first time in history, markets around the world crashed together.
Thanks to globalization and electronic trading, panic spread faster than any virus. By the time New York opened on Monday, Asia had already crashed. And when Tuesday came...
Hong Kong
-45.5%
Shut down for a week after the crash
Australia
-41.8%
Worst crash in Australian history
United Kingdom
-26.4%
FTSE collapsed over two days
Canada
-22.5%
TSX mirrored the Dow's destruction
In total, world markets lost an estimated $1.71 trillion in October 1987. Adjusted for inflation, that's over $4 trillion today.
"This is not just a stock market crash. This is a test of the entire financial system. And right now, I'm not sure if we're passing or failing."
— Federal Reserve Official, October 1987
The Heroes: Who Saved the Market?
As Black Monday turned into Black Tuesday, the financial system stood on the edge of total collapse. Banks were refusing to lend. Market makers were going bankrupt. If trading stopped entirely...
Then came Alan Greenspan — the newly appointed Federal Reserve Chairman. He'd been on the job for just two months.
On Tuesday morning, before markets opened, the Fed released a single, 29-word statement:
The Fed's 29-Word Rescue
"The Federal Reserve, consistent with its responsibilities as the nation's central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system."
Translation: "We'll print whatever money it takes. We won't let the system fail."
The Fed flooded the system with cash. They called major banks personally and told them to keep lending. They became the buyer of last resort.
And it worked. Tuesday saw wild swings, but the complete collapse was avoided. By Wednesday, the market was stabilizing. The system survived.
Alan Greenspan
New Fed Chair's calm response prevented panic from becoming collapse. His legendary status was born in crisis.
Major Banks
Under pressure from the Fed, banks continued lending to brokerage firms, keeping them liquid when they should have failed.
Corporate Buybacks
Major companies announced huge stock buyback programs, signaling confidence and providing buying support.
The Specialists
NYSE floor specialists used their own capital to keep trading going, many losing fortunes in the process.
Who Made Money on Black Monday?
While most of Wall Street bled, a few traders saw the crash coming — and profited enormously.
Paul Tudor Jones
Predicted the crash. Made $100 million shorting the market. His fund returned 125.9% in 1987.
George Soros
Lost money on US stocks, but his overall fund still survived. He learned from his mistakes.
Warren Buffett
Lost $342 million in one day but never sold. By 1989, he'd made it all back and more.
Paul Tudor Jones deserves special mention. Months before the crash, he noticed eerie similarities between 1987 and 1929. He made a private documentary called "Trader" showing his analysis.
"There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it's the end of a bull market or the end of a bear market. There's typically no logic to it. It just becomes emotional."
— Paul Tudor Jones
When Black Monday hit, Jones was ready. He shorted the S&P 500 futures aggressively and made a fortune while others lost everything.
The Aftermath: What Changed Forever
Black Monday forced Wall Street to evolve. The crash exposed critical weaknesses in the financial system — weaknesses that had to be fixed.
Circuit Breakers
NYSE introduced trading halts when markets drop too fast. The crash proved markets need time to breathe during panic.
Cross-Market Coordination
Stock and futures markets began coordinating during crashes. No more disconnect between markets.
Fed Backstop
The "Greenspan Put" was born — the belief that the Fed would rescue markets in crisis. Still exists today.
Algorithm Oversight
Regulators began watching computer trading programs. Portfolio insurance was largely abandoned.
Here's the crazy part: The economy didn't crash.
Unlike 1929, Black Monday didn't cause a depression. There was no banking crisis. GDP kept growing. By 1989, the Dow had fully recovered all its losses.
Lessons from Black Monday
Black Monday offers timeless wisdom for every investor and trader:
Crashes Come Fast
22.6% in one day. By the time you react, it's too late. Either be prepared beforehand or ride it out.
The Herd Kills
When everyone uses the same strategy (portfolio insurance), everyone fails together. Beware of crowded trades.
Selling in Panic is Wrong
If you sold on October 19, 1987, you locked in a 22.6% loss. If you held, you recovered in 2 years.
Cash is King in Chaos
Those with cash on Black Monday bought stocks at generational discounts. Terror creates opportunity.
Markets Always Recover
Every crash in history has been followed by recovery. Time in the market beats timing the market.
Risk Management is Everything
Paul Tudor Jones made $100M because he was positioned right. Position sizing and hedging save lives.
Black Monday's Warning for Today
In 2025, we have more algorithms trading than ever. High-frequency trading dominates. Flash crashes happen regularly. Markets are more interconnected globally than in 1987.
Could Black Monday happen again? Absolutely. In fact, many believe the conditions for another crash are building.
But here's what Black Monday really taught us: Markets are not rational. They're emotional. They're human. And when humans panic, the impossible becomes inevitable.
The investors who survive — and thrive — are those who prepare for disaster while hoping for the best. They have cash reserves. They have hedges. They have the psychological strength to NOT sell at the bottom.
"The stock market is a device for transferring money from the impatient to the patient."
— Warren Buffett
On October 19, 1987, the impatient lost everything. The patient became legends.
Black Monday wasn't the end of Wall Street. It was a reminder: Markets crash. Panic happens. But those who stay calm, stay invested, and stay prepared always come out ahead. The crash is never the end — it's the opportunity.