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The Market Crash of 1987

"On this page, you will find charts, which are illustrating the trends of major stock indices and other market indicators during the US stock market crash of October 1987.

This also includes the special event day:

• 19th of October 1987, Black Monday."

Wolfgang, founder

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The Market Crash of 1987 - Overview

On one single day, 19th of October 1987, also known as "Black Monday", the
 
- S&P 500 index lost 20.5%, the
- Dow Jones Industrial Average index lost 22.6% and the
- NASDAQ Composite index lost "only" 11.3%.

But this severe one-day US stock market panic also affected other international stock markets.

S&P 500 is a registered trademark of Standard & Poor's Financial Services LLC. DOW JONES INDUSTRIAL AVERAGE is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). NASDAQ COMPOSITE is a registered trademark of The Nasdaq Stock Market Inc.

Severe US Stock Market Crash

S&P 500 Index

The S&P 500 index climbed to an all-time high at 336.77 index points on 25th of August 1987. Two months later, on the 19th of October 1987, the S&P 500 Index was at 224.84 index points, which represents a decline of more than 33%.

S&P 500 Index during the market crash of 1987

S&P 500 is a registered trademark of Standard & Poor's Financial Services LLC.

New York Stock Exchange (NYSE) Trading Volume

On 19th of October 1987, the stock trading volume at the New York Stock Exchange (NYSE) soared to 604 million traded stocks. In comparison, the average NYSE trading volume in 1987 was only 189 million shares traded per day.

New York Stock Exchange (NYSE) trading volume

NYSE and NEW YORK STOCK EXCHANGE are registered trademarks of NYSE Group Inc.

S&P 100 Index - Implied Volatility

Starting on Friday, 16th of October 1987, the aggregated implied volatility of at the money index options on the S&P 100 index soared from 36.37% to 150.19% on Monday, the 19th of October 1987. The intra-day high - and also the all-time high since the inception of this volatility indicator - was at 152.48%.

Implied volatility S&P 100 Index - VXO Index - CBOE

S&P 100 is a registered trademark of Standard & Poor's Financial Services LLC. CBOE and VXO are registered trademarks of CBOE Exchange Inc.

Market Crash - Potential Reasons


Besides the rapid psychological shift of the market participants the following, traditional, potential reasons for the stock market panic of 1987 could be:

- rapidly increasing short term US interest rates - the annualized yield of 3 Months US Treasury Bills rose from 5.30% on 20th of January 1987 to the highest close of the year: 7.19% on 14th of October 1987 - an increase of 189 basis points

- rapidly increasing long term US interest rates - the yield of 30Y US Treasury Bonds increased from the low of the year: 7.29% on 9th of January 1987 to the high of the year: 10.25% on 19th of October 1987 - an increase of 296 basis points

- weakening US Dollar - US Dollar showed weakness against major foreign currencies
deteriorating US current account deficit

- escalating US government debt

- very high price-earnings-ratios (P/E)

- meager dividend yields

- very bullish investor sentiment figures and too much optimism by investors

- deteriorating "market breadth" - weak advance-decline-line and new highs versus new lows

BUT there were no critical events or important news before the Black Monday in October 1987 justifying the drastic decline of US equities and the following severe drop of global share prices.

Market Crash 1987 - Key Indicators

US Treasury Bills

US Treasury bills yield - 3 months

Treasury Bonds

US treasury bonds yield - 30 years

US Treasury Bond Futures

US Treasury bond futures CME

CME and Chicago Mercantile Exchange are registered trademarks of Chicago Mercantile Exchange Inc.

US Dollar

US Dollar Index futures

ICE is a registered trademark of Intercontinental Exchange Inc. U.S. Dollar Index is a registered trademark of ICE Futures U.S. Inc.

US Current Account

US current account deficit

Price-Earnings-Ratio (P/E Ratio)

Price-earnings ratio (P/E ratio)

S&P 500 is a registered trademark of Standard & Poor's Financial Services LLC.

Dividend Yield

The dividend yield of the S&P 500 stocks

S&P 500 is a registered trademark of Standard & Poor's Financial Services LLC.

Market Breadth - Advance-Decline Line

Market breadth - advance-decline line - NYSE

NYSE and NEW YORK STOCK EXCHANGE are registered trademarks of NYSE Group Inc.

Market Breadth - New High and New Lows

Market breadth - new highs and new lows - NYSE

NYSE and NEW YORK STOCK EXCHANGE are registered trademarks of NYSE Group Inc.

Gold

Gold price

Commodities

Commodities price index

In 1994 the New York Futures Exchange (NYFE) was bought by the New York Cotton Exchange (NYCE). In 1998 the NYCE and the Coffee, Sugar and Cocoa Exchange (CSCE) merged into the New York Board of Trade (NYBOT), which is now owned by the Intercontinental Exchange.
The Reuters Jefferies/CRB Index Futures contracts were delisted by ICE Futures U.S. on 25th of September 2012.

Crude Oil

Crude oil price

New York Mercantile Exchange, NYMEX, CME, and Chicago Mercantile Exchange are registered trademarks of Chicago Mercantile Exchange Inc.

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