Market Crash? What's That?
What does a bad day in the stock market feel like? In a sense, people who started investing in the early 1990s wouldn't know.
Sure, there have been days when the Dow Jones Industrial Average lost a lot of points. But what affects investors' wallets isn't the point change; it's the percentage change. As of year-end 1997, the biggest one-day percentage loss in the industrial average during the 1990s was a 7.18% drop on Oct. 27, 1997.
That decline was spurred by economic woes in Asia that pushed the Hong Kong market down more than 23% in four days. But the drop in the Dow didn't even make the top ten list (it was No. 12).
The fact is, it was the only one of the 100 greatest percentage losses in the Dow industrials (all 4.27% or more) that has occurred in this decade. Before that, the biggest one-day percentage loss in 1990s in the DJIA was 3.93% in November 1997.
The accompanying table shows the five biggest one-day percentage losses in history. The biggest was the historic crash that brought the industrials down 22.61% on Oct. 19, 1987. Among the causes of the 1987 crash were rising interest rates, the U.S. bombing of Iranian oil platforms, friction with U.S. trading partners, rampant speculation in the futures markets, and loss of investor confidence after the Dow industrials skidded in September and early October.
The second-worst, third-worst and fourth-worst days occurred within about a week of each other in the crash of 1929. As in 1987, the 1929 crash had been preceded by a boisterous economic and stock-market boom. Speculation by investors who needed to put down only 10% of the purchase price for their stocks fueled the Roaring Twenties bull market, but also aggravated the crash. When their brokers demanded more collateral, investors were forced to sell shares, producing a downward spiral.
The fifth-worst day was Dec. 18, 1899. According to historian Robert Sobel of Hofstra University, the U.S. had suffered some casualties in the Philippines fighting against guerrillas seeking independence, and the British had suffered losses in the Boer War. What's more --- as is so often a factor in market declines -- interest rates were rising.
The Five Worst Days
Largest one-daypercentage drops in the Dow Jones Industrial Average
Date Point Loss % Loss
Oct. 19, 1987 508.00 22.6
Oct. 28, 1929 38.88 12.8
Oct. 29, 1929 30.57 11.7
Nov. 6, 1929 25.55 9.9
Dec. 18, 1899 5.57 8.7
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