A Shock Felt Round the World
By Ed Magnuson
Investors all over the globe were nervous even before markets opened on the historic day that came to be Black Monday, Oct. 19, 1987. On the previous Friday, the Dow Jones industrial average had suffered a record one-day ecline of 108.36 points, to 2246.73. The sense of imminent foreboding was evident as far away as Australia, where the Monday-morning sun rises over the acific while it is still Sunday afternoon in New York City.
MONDAY, OCTOBER 19
MELBOURNE, 10 A.M.
One of the first markets to open after Friday's Wall Street scare quickly signals the shocks to come. On a catwalk above the gathering gloom on the trading floor, neatly uniformed "chalkies" sketch stock prices on a green board. All are falling.
TOKYO, 9 A.M.
Uncertainty prevails among the 2,000 dealers in the brand-new Kabutocho exchange building as they try to make sense of Friday's record loss in New York. What will happen on Wall Street later today? The Nikkei Dow Jones index of 225 traded stocks falls from 26,366 to 25,746.
HONG KONG, 10 A.M.
Traders in red waistcoats on the Hong Kong Stock Exchange floor trade in a rush as the Hang Seng index of 30 stocks opens at 3783. In 40 minutes, it drops 133 points. The index ends the day down 421, the worst point loss ever. Officials close the exchange for four days.
LONDON, 8 A.M.
A backlog of sell orders has accumulated from Friday, when damage from one of Britain's worst windstorms kept many dealers home. That day's selling gusts from New York make things even worse. Says Christopher Dark, a manager of Salomon Brothers' London branch: "I keep thinking about the little man with the sign saying THE END OF THE WORLD IS NIGH."
NEW YORK, 9 A.M.
On the 34th-floor trading room of the Donaldson, Lufkin & Jenrette (DLJ) brokerage firm on Wall Street, arriving traders are startled by the presence of uniformed security guards. Corporate officials, deluged by cabled sell orders, know a rough day is ahead: the guards are there to protect traders from any violent clients. The New York Stock Exchange is not yet open, but already some of the firm's brokers are perspiring at their telephone consoles, staring at banked arrays of 200 blinking buttons. Tension mounts as Dudley Eppel, a managing director, delivers a grim pep talk: "Well, here we go. Let's keep our cool and maybe we'll all get through this thing alive. Let's go get 'em!"
NEW YORK, 9:30 A.M.
The Big Board opens. At the bell, the Dow is already off 67 points. In the next 30 minutes, 50 million shares are sold. At DLJ two blocks away, glowing green figures on computer consoles trace the market's fall. "We're going underwater!" shouts Trader John Sesko as he pops Tic Tac candies into his dry mouth. "55,000 Pepsis to sell!" barks one trader. "60,000 GM to sell!" yells another. The cries do not stop. "Boston wants to sell 30,000 J.P. Morgan!" Long before lunchtime, a trader shouts, "Hamburger to go! Hamburger to go in six figures!" He wants to peddle 100,000 shares of McDonald's.
NEW YORK, 10:30 A.M.
Already 140 million shares have been traded -- normally a calm day's average volume. The Dow has sunk another 34 points, down a total of 101, to 2145.
LOS ANGELES, 7:30 A.M.
Physician Richard Weiss listens to radio reports of the developing fiasco as he drives to work. Weiss pulls off the freeway and phones his broker with an % order to sell his entire portfolio. The broker ticks off plummeting quotes. "There's Disney going 78, 70, 68. We're making history here." Says Weiss: "We're doing it with my money." He loses $100,000.
NEW YORK, 11 A.M.
The mood turns surly at DLJ. "Get off my butt!" yells a sweating trader to another. As one man breaks into a stream of curses, Managing Director Eppel jumps to his feet. "Now stop it! Just calm down!" The Dow is down 201 points in 1 1/2 hours.
FRANKFURT, 4 P.M.
Treasury Secretary James Baker meets secretly with West German Finance Minister Gerhard Stoltenberg and Bundesbank President Karl Otto Pohl. Out of the session comes a statement pledging cooperation in stabilizing currencies. Earlier in the day, Bonn's central bank takes steps to ease interest rates.
NEW YORK, 11:45 A.M.
There is a glimmer of hope. After dropping 201 points, the Dow has gained 95 in the past 30 minutes. It now stands at 2130. Is a turnabout in the works?
NEW YORK, NOON
The Dow, now falling, is at 2103. Long lines of people form to take turns in the N.Y.S.E.'s spectator gallery. Heather Walker, 27, wants to "tell my grandchildren I was there." But she wonders if the crash means she will never be a mother. "Even in good times, men are scared of getting married," says Walker. "In the coming depression, forget it."
WASHINGTON, 12:30 P.M.
White House Chief of Staff Howard Baker is on the phone to N.Y.S.E. Chairman John Phelan, among others. Baker also calls Treasury Secretary Baker in Europe, and he agrees to return as soon as possible to Washington.
NEW YORK, 12:30 P.M.
The Dow is falling again, now down 173.
SAN FRANCISCO, 10 A.M.
At Associated Foreign Exchange, a precious-metals and foreign-currency brokerage, a run begins on Krugerrands, Canadian Maple Leafs and American Eagle gold coins. The frenzy ends only when the company's entire stock is sold: 2,500 coins worth nearly $1 million.
WASHINGTON, 1 P.M.
David Ruder, chairman of the SEC, inadvertently sets off rumors that the N.Y.S.E. may be shut down. The market skids an additional 100 points in the next hour.
CHICAGO, NOON
The Standard and Poor's 500 trading pit at the Chicago Mercantile Exchange is quiet. Trading at the futures pit normally ratchets up or down in shifts of $5 to $20 a contract. Now it is moving in ticks of $250 to $1,000. )
SAN FRANCISCO, 10:45 A.M.
Pink buy and sell orders litter the floor of the Pacific Stock Exchange. "I surrender!" shouts a frustrated dealer. Another slams his fist into his computer terminal.
NEW YORK, 2:15 P.M.
The Dow is down 300 points. Outside the N.Y.S.E., an investor jumps atop a parked car and screams, "Down with Reagan! Down with M.B.A.s! Down with yuppies!"
HOUSTON, 2 P.M.
Broker Walter Burke pauses amid the plaintive calls from his customers. "Everyone's scared," he says. "They're bailing out." But he finds one consolation. "A fast death," he philosophizes, "is better than a slow one."
BOSTON, 3 P.M.
At Fidelity Investments, manager of $75 billion worth of stock-market mutual funds, investors redeeming shares or switching to other funds swamp the firm. The company invokes a rarely used rule that allows seven days for such orders to be transacted.
WASHINGTON, 3:40 P.M.
Howard Baker and his deputy, Kenneth Duberstein, brief Ronald Reagan on the crash. White House Spokesman Marlin Fitzwater is instructed to issue a few calming words: "The underlying economy remains sound."
NEW YORK, 4 P.M.
The Big Board's worst day finally ends. Traders try to assess the damage. It will take them four more hours to process paper work created by the 604 million traded shares, a record. The day's loss of 508 points is another, most unwanted, first.
NEW YORK, 4:20 P.M.
Chairman Phelan declares the selling binge the "nearest thing to a financial meltdown that I ever want to see." Then he tempers his alarm: "These things usually exhaust themselves."
ST. LOUIS, 3:30 P.M.
Elliot Stein, chairman of Stifel Financial Corp., one of the city's largest investment firms, addresses his employees in grim jest: "I would like to open our teleconference by leading you in prayer."
WASHINGTON, 5 P.M.
Reagan, shouting over the roar of a helicopter's blades on the White House grounds, insists, "I don't think anyone should panic because all the economic indicators are solid."
TUESDAY, OCTOBER 20
TOKYO, 9 A.M.
In the first half-hour at the exchange, trading stops on all but three of the 250 listed Japanese stocks. "I've never seen anything like this," complains a trader. A downward spiral does not stop until 14.9% is chopped off the value ( of the Nikkei index. It is the worst one-day fall ever, eclipsing the 10% drop set off by the 1953 death of Joseph Stalin.
MILAN, 10 A.M.
Rumors of a shutdown sweep the Palazzo Mezzanotte trading floor as the opening bell fails to ring. Finally the dealing begins, one hour late. As Fiat, Olivetti and other stocks lose 10% of their value, trading is stopped in each.
LONDON, 12:30 P.M.
U.S. investors have cabled sell orders, trying to dump shares in the British market. The Financial Times stock index drops 304 points by midday. Says a young dealer: "It is like opening a suitcase the wrong way and having all the contents spill out."
PARIS, 1:45 P.M.
LE CRASH, headlines the newspaper Le Quotidien, as local share prices stay flat for the day. The government postpones plans to sell shares in Matra, a giant state-owned defense and electronics firm.
WASHINGTON, 9 A.M.
Federal Reserve Board Chairman Alan Greenspan assures the nation's banks that the Fed will provide fresh funds if needed.
NEW YORK, 9 A.M.
Chemical and Marine Midlandbanks, which had raised their prime rates from 9 1/ 4% to 9 3/4%, roll back the hike.
NEW YORK, NOON
The N.Y.S.E. gyrates so wildly that floor specialists, who normally buy and sell stocks when no one else will, run out of cash. Trading stops in nearly 90 stocks. Exchange Chairman Phelan considers shutting down the entire market, but a sudden 120-point rally stays his hand. For a time, the Dow hovers at 1750.
SAN FRANCISCO, 9 A.M.
"Stop trading General Mills, influx of orders. Stop trading Northwest Air, influx of orders," command the p.a. speakers at the Pacific Stock Exchange. But the market trend is up. Says Specialist Kurtis Kupiec: "Today the world's a better place."
NEW YORK, 4 P.M.
The banks' moves spur a closing rally. The Dow winds up at 1841.01, a climb of 102.27 points. Trading breaks Monday's volume record. At the bell, Phelan waves from a balcony overlooking the floor. Relieved traders wave back and cheer.
WASHINGTON, 4:30 P.M.
Five senior advisers join Reagan in the White House and urge him to reassure the nation. This time the President tells a group of reporters, "I am willing to look at any proposals" from lawmakers on the budget deficit.
WEDNESDAY, OCTOBER 21
TOKYO, 9 A.M.
The worst is over -- for now. A flood of buy orders propels an explosive rebound on the Kabutocho exchange. As each massive block of offered stock is snapped up, the trading floor erupts in applause. The Nikkei index makes a record gain of 2037.32 points.
NEW YORK, 10 A.M.
The news from Tokyo buoys Wall Street, as do the Fed's reassurances of the previous day on the availability of credit. Major corporations take advantage of greatly discounted prices to buy back large blocks of their own stock. Other bargain hunters also begin to prowl. One broker says the market is moving "from hell to heaven."
LONDON, 5 P.M.
After some swings, London joins the uptick. A Monday-Tuesday loss of $155 billion in stock values is dented by a hefty $48 billion recovery. The one-day stock-exchange index leaps 142.2 points, to 1943.8, a record increase.
NEW YORK, 4 P.M.
Before the final bell, 90 large companies announce plans to buy back their own shares. Phelan has asked the big-fund managers to avoid automatic programmed purchases and, above all, sales. This feeds the surging optimism and causes the Dow's biggest single-day climb ever: up 186.84 points, to 2027.85. More than half of Monday's loss is recovered.
THURSDAY, OCTOBER 22
TOKYO, 9 A.M.
The market starts strongly and does not falter. The Nikkei average picks up 475.05 points.
ZURICH, 9:15 A.M.
Traders at the 100-year-old exchange remain nervous. The market's index sinks 6.7%, from 1047.52 to 975.1.
TORONTO, 9:30 A.M.
Spirits are still high on the floor from Wednesday's lively market. Yet the Toronto index skids 142 points (4.3%) in the first hour. "This is like a yo- yo," laments one trader.
NEW YORK, 9:30 A.M.
Just before the opening bell, Phelan reads aloud a message from President Reagan praising traders for their "calm, professional" work during the frantic week. Citibank lowers its prime rate by a quarter-point, to 9%; other New York banks follow within 20 minutes. Inexplicably, the market plummets 138 points in the first 45 minutes, to 1888.
WASHINGTON, 2 P.M.
Both James Baker and Howard Baker prod Reagan in a series of White House meetings to work toward a market-calming budget compromise. They prep him for his critical 8 p.m. press conference. The President is advised to walk a delicate line: exude confidence about the economy without sounding like Herbert Hoover.
NEW YORK, 4 P.M.
Despite the scares, the floor traders heed the buttons they are wearing: DON'T PANIC. The Dow zigzags to a closing loss of 77.42 points, still worrisome. The N.Y.S.E. announces that on the next three trading days the market will close at 2 p.m.
WASHINGTON, 8 P.M.
Reagan wobbles a bit on his press conference tightrope. He tacitly concedes that the U.S. is in an economic mess.
FRIDAY, OCTOBER 23
TOKYO, 2 P.M.
After a calm morning, a rumor wafts through the exchange: Iran is about to accept a cease-fire in its gulf war with Iraq. High-tech stocks like Matsushita and Fujitsu take off. But the Japanese government cannot confirm the report, and stocks retreat. In the final hour, a wave of panic selling drives the index down by 1203.23 points, to 23,201.22. It is Tokyo's second worst one-day beating ever.
FRANKFURT, 3 P.M.
The U.S. dollar ends the week at 1.8060 marks, vs. 1.8015 a week earlier. The gain is modest but ironic, in view of the intention expressed by U.S. officials the weekend before to improve U.S. competitiveness by allowing a decline.
NEW YORK, 2 P.M.
The N.Y.S.E. closes two hours early with a minute change in the Dow (up .33 points, to 1950.76). Pondering the incredible week, Manhattan Investment Banker Felix Rohatyn, a staunch critic of Reagonomics, says he sees a new world in which governments are "held hostage" by the financial markets. He adds, "We really do not know what we've created. It's high tech and it's transnational and more powerful than anything we could ever have imagined."
NEW YORK, 3:30 P.M.
Donaldson, Lufkin & Jenrette Trader John Sesko goes straight from his company's trading floor to an automated bank machine elsewhere in Manhattan. Sesko punches its buttons, withdraws $100 and puts the money in his pocket. The cash, he says, "gives me a sense of security." Then he climbs onto a commuter train and sleeps all the way home to suburban Connecticut.
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With reporting by Thomas McCarroll and Raji Samghabadi/New York, with other bureaus