Storm clouds gathered before 'Black Monday'

THURSDAY, OCT. 15, 1987, NEW YORK STOCK EXCHANGE

As the market opened on Thursday, the Dow stood at 2,412.  Traders held their breath as selling pressure seemed to be letting up.  Even so, by the end of the day … 

Tom Brokaw: “Dizzy from yesterday’s record loss, still another dive today.  The Dow off 95e yesterday, fell more than 57 points today to 2,355.”

FRIDAY, OCT. 16, 1987, PERSIAN GULF

Friday brought a different sort of bad news.

A U.S.-flagged tanker had been attacked by Iranian forces in the Persian Gulf.  The White House was said to be weighing a response. President Reagan announced that the U.S. was in discussions with the government of Kuwait.

Meanwhile, the market gyrated wildly through the day.  Program selling one minute, driving the market down, program buying the next, in a nerve-wracking reversal. 

But ultimately it didn’t end well. For the first time in history, the market lost more than 100 points in a single day. The Dow Jones industrials were down more than 108 points, closing at 2,246.

Veteran Broker: “I'm down here 51 years. I haven't panicked yet. I wouldn't panic. Why panic? It'll be up 100 on Monday. 200 on Monday."

But not everyone was so optimistic.

David Ruder (Chairman, SEC, 1987-1989): "During that week the total drop in the market was roughly from 2,500 to 2,250.  A very substantial drop in that period of time.  So we were, we were concerned."   

Richard Ketchum (Director, SEC Market Regulation, 1984-1990): "We were involved in a substantial number of phone calls over the weekend both with the staff at the SEC, with Chairman Ruder and with the Federal Reserve Board, and the New York Fed, both to begin to look and see what the financial impact had been, whether there were any credit concerns, and then to get a better feeling, talking to major firms. And it was clear from the input that we were getting that weekend that Monday morning was a big risk."

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Sue Herera: "Over the weekend, I called sources to try and find out what they were expecting for Monday morning.  No one that I talked to had a good feeling. And many of them were in long positions. Meaning they were holding stocks.  And they were uncomfortable with that. And I just had a sense of foreboding, this sinking feeling that it was not going to be a good day."

Leo Melamed (Chairman, CME, 1969-1992): "That weekend, the press carried a great deal of stories which in fact increased the fear of the participants that, in fact, there had been a signal and that everybody that was in the market, was thinking in terms of ‘Well, on Monday, I think I’ll take my profits.’ That weekend, I myself was scared of the headlines.”

John Phelan (CEO, NYSE, 1975-1990): "I went down to the office. I talked to our operations people and everything else. And said, 'You know, we've got to batten down the hatches here."

Leo Melamed: "We all agreed we were gonna have a difficult week coming up. That was quite clear. But none of us could envision what really happened."

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