DOW RECORD PLUNGE: 554; NOSE DIVE PUTS HALT TO TRADING.
The Dow Jones industrial average suffered its worst single-day point drop Monday, tumbling 554 points in a $600 billion sell-off that shut down the market for the first time since the 1981 assassination attempt on President Reagan.
The market's best known barometer fell 554.26 points to 7,161.15, surpassing the 508-point Black Monday crash of 1987.
But on a percentage basis, Monday's 7.18 percent drop by the Dow only ranked as the 12th-biggest ever and didn't come close to the 22 percent loss on Oct. 19, 1987.
Although the Dow is still up 11 percent since the beginning of the year, the sell-off put the Dow's losses at about 900 points over the past four sessions and 1,100 points since it set a record high at 8,259.31 on Aug. 6.
``It's a blood bath,'' said Arnold Kaufman, a market analyst at Standard & Poor's. ``It scares you because when you get a decline this fast, there's a risk it will keep snowballing.''
The damage continued in Asia today. In Hong Kong, the Hang Seng index tumbled 14.27 percent, or 1,497.59 points, to 9,000.61 points by early afternoon. In Tokyo, the Nikkei Stock Average lost 725.67 points, or 4.26 percent, to end the day at 16,312.69.
The Dow's drop Monday amounted to a $600.04 billion loss, shrinking its value to $8.537 trillion, as measured by Wilshire Associates Equity Index, the combined market value of all issues on the New York Stock Exchange, American Stock Exchange and Nasdaq composite index.
The Dow's drop triggered two circuit breakers on the New York Stock Exchange that had never been set off since they were put in place after the 1987 sell-off. The first circuit breaker, at 350 points, closed the market for 30 minutes. The second, at 550, halted trading for the day.
It remains to be seen how much of Monday's selling was fueled by mutual fund investors. Publicly, however, many individual investors portrayed an unflappable facade.
``I wish I had more money to invest,'' said Helen Ginty, 60, a secretary in New York, asserting that she plans no change in her retirement investment strategy. ``I don't think people are as crazy as they used to be'' during a downturn.
For many analysts, the drop was notable because the Dow has now fallen 13.3 percent from its Aug. 6 record high of 8,259.31, ending an unprecedented streak of seven years without a ``correction'' of at least 10 percent.
Declining issues also outnumbered advancing ones by an astounding 16-to-1 margin on the New York Stock Exchange, where volume came to 685.52 million shares, the busiest day in the exchange's history.
Stocks started Monday lower as another sharp sell-off in Hong Kong triggered another wave of selling in financial markets around the globe, but the selling didn't pick up steam in the United States until Monday afternoon. The Dow, for example, was down just 115 points at midday.
The mounting financial crisis in Hong Kong has ignited fears about whether global business conditions will be undermined by Southeast Asia's shaky economics, where mounting trade deficits have sent interest rates soaring and local currencies plunging.
Hong Kong's Hang Seng index fell 7 percent, as foreign markets also fell Monday.
S&P's Kaufman, however, asserted that a stream of weak earnings reports or a jump in interest rates could have set off a steep decline just as easily as Hong Kong's problems.
``The Southeast Asia crisis is just a trigger,'' he said. ``Something would have come along at some point. This is what came along.''
And once again, analysts stressed that although plenty of U.S. companies do business in Asia, this nation's financial health is only slightly dependent on the fortunes of Southeast Asia.
``I take great heart in the fact that fundamentally, the underpinning of our market is solid,'' said John Shaughnessy, chief investment strategist at Advest Inc. in Hartford, Conn.
``I still view this as a nasty correction in what still remains a bull market. This is such a highly reversible, emotional event. I feel comfortable that something good will happen and turn things around,'' Shaughnessy said.
The Standard & Poor's 500-stock index, the standard against which most mutual funds are compared, tumbled 64.65 to 876.99, a loss of nearly 7 percent.
The Nasdaq, dominated by technology companies that do more business in Asia than most other American industries, also suffered its worst one-day point drop ever, falling 115.83 to 1,535.09.
Once again, though, U.S. Treasury bonds bucked the trend as investors sought safer places to put their cash until the equity markets steady. The rise in bond prices pushed the yield on the 30-year Treasury bond - a key influence on borrowing costs - to its lowest level since early 1996.
Notes on the day; CIRCUIT BREAKERS:
After the 1987 stock market crash, the New York Stock Exchange adopted new rules, often called circuit breakers, intended to slow a market fall:
50 points: When the Dow Jones Industrial average loses or gains 50 points from the previous day's close, computer program trades based on the stocks in the Standard & Poor's 500 stock index are restricted. When the market is down, sell orders can't be executed at lower prices. In an up market, buy orders can't be executed for higher prices.
About 100 points: When the futures contract on the S&P 500 index falls 12 points, which works out to about 100 points in the Dow, program trading orders are set aside for five minutes. If orderly trading doesn't resume in a stock, its trading is halted. The five-minute rule does not apply in the last 35 minutes of trading.
350 points: Trading in all stocks is halted for 30 minutes.
550 points: Trading is halted for one hour, which Monday meant for the remainder of the day.
The following is a chronology of Monday's plunge in U.S. stocks:
9 a.m.: Overnight trading in Standard & Poor's 500 index futures concludes. The December contract closes at 933.75, down 10.25 - equivalent to a decline of about 84 points in the Dow Jones Industrial Average.
9:30 a.m.: The New York and American stock exchanges open for trading.
9:36 a.m.: The NYSE imposes its ``uptick'' rule, curbing certain types of computer-guided trading in order to stabilize the market, after the Dow industrials fall 50 points.
10:57 a.m.: The average shows a 100-point loss, paced by Merck & Co., Aluminum Co. of America and Procter & Gamble Co.
12:54 p.m.: The loss in the Dow industrials widens to 200 points.
1:56 p.m.: The average's decline reaches 300 points, marking a 10 percent drop from its Aug. 6 closing high of 8,259.31.
2:35 p.m.: The NYSE halts trading in U.S. stocks for half an hour after the Dow industrials fall 350 points, marking the first time that it imposed the trading curb since it was adopted in the wake of the 1987 crash.
3:05 p.m.: U.S. stock trading resumes.
3:28 p.m.: The Dow industrials' percentage loss exceeds the 6.91 percent drop on Oct. 13, 1989, known as the ``mini-crash.''
3:30 p.m.: The NYSE halts trading for the rest of the session after the Dow industrials fall 550 points. The average closed down 554.26, or 7.18 percent, at 7,161.15. The decline was the biggest ever in terms of points; the percentage drop was the largest since an 8.04 percent drop on Oct. 26, 1987, a week after the crash, when it fell 22.61 percent.
THE INTERNET FACTOR:
The downward spiral of stock markets around the world sent people scurrying to their computers Monday, clogging online financial news sites and trading centers.
At TheStreet.Com, a financial news site on the World Wide Web, editor-in-chief Dave Kansas said traffic was so heavy that some subscribers were sent messages warning that too many users were online.
``That's never happened before,'' Kansas said, adding that the traffic surge started last week when currency instability from Southeast Asia spread to Hong Kong.
The five richest Americans, according to the most recent ranking by Forbes magazine, saw the value of their principal holdings shrink by nearly $4 billion during Monday's stock market sell-off.
Following is a list of those five and other famous billionaires, their principal holdings, and Monday's drop in value for those holdings:
Bill Gates, chairman and chief executive of Microsoft Corp., $1.76 billion.
Warren Buffett, chairman and CEO of Berkshire Hathaway Inc., $717.3 million.
Paul Allen, co-founder of Microsoft Corp., $600 million.
Larry Ellison, chairman, CEO and president of Oracle Corp., $666.9 million.
Gordon Moore, chairman of Intel Corp., $236.2 million.
Walton family, Wal-Mart Inc., $1.64 billion.
Ted Turner, vice chairman of Time Warner Inc., $185 million.
Michael Dell, chairman and CEO of Dell Computer Corp., $324.4 million.
Phil Knight, chairman and CEO of Nike Inc., $269 million.
2 Photos, box
PHOTO (1 -- 2 -- color) Traders cheer the halt of trading at the American Stock Exchange on Monday as one trader reacts to numbers on the Big Board.
Box: Notes on the day (see text)
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||Oct 28, 1997|
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