Paper: Chicago Tribune

Title: DARKEST DAY FOR WALL STREET

Date: October 20, 1987

Massive selling turned Monday into the stock market`s worst day in

history, completing the erasure of all the gain the Dow Jones industrial

average has made since the first of the year.

The Dow industrials plummeted 508.32, or more than 22.62 percent, to

close at 1738.74. That plunge exceeded the 12.8 percent fall on Oct. 29, 1929. The blue-chip indicator opened the year at about 1900.

``This was a mini-crash this morning. It is out of everyone`s league,``

said Jon Groveman of Ladenburg Thalmann and Co., as the shell-shocked market

added to its record decline of 235 points last week.

The panic selling also sparked declines in foreign stock markets.

The precipitous drop was fed by record trading volume that pointed to a

death blow for the 5-year-old bull market.

Volume of about 604 million shares was the heaviest ever on the New York

Stock Exchange, exceeding the previous record of 338 million for a session set last Friday.

It was a day of wild swings and frenzied trading that left even seasoned

market analysts groping for words.

The 30-stock Dow indicator recovered about 100 points in mid-morning as

some steel-nerved traders came back into the market. But pessimism again

overtook the market, sending the barometer downward again.

Trude Latimer of Josephthal and Co. said: ``It is out-and-out panic. I

have never seen anything even close to this.``

``It is absolutely wild,`` said Rhett Dupont Jr., a New York Stock

Exchange official.

``I would say we will have an all-time opportunity to prove whether there is a bottom to this market,`` Dupont said.

Hardly any of the more than 1,500 stocks on the Big Board showed gains,

as declining issues led advancers by a 48-to-1 ratio.

Traders ran from station to station to get their orders placed and, in

some cases, bickered with others waiting in line trying to use automated trade equipment.

Wall Street sidewalks were eerily vacant at lunchtime, in contrast to

their usual bustle, as traders struggled to keep up with the blizzard of

orders.

``The people in Podunk are trading blindly. They have no idea what`s

going on. They just want out,`` said one harried trader.

In periods of the day, the NYSE ticker tape displaying stock prices ran

more 100 minutes behind trading. Exchange Vice President Richard Torrenzano

said: ``We just can`t make the tape run any faster because you wouldn`t be

able to read it.``

In Washington, Securities and Exchange Commission Chairman David Ruder

said a brief trading halt has been discussed to restore order to the market

but stressed he is not recommending one.

Ruder told reporters that he has been in frequent contact with NYSE

Chairman John Phelan about the market`s drop.

On Friday, the market suffered its first 100-point setback, losing 108

points to cap a miserable week in which it shed a record 235 points.

The gloom that pervaded the market was compounded on Monday by the

prospects of an even weaker dollar in response to recent credit tightening by West Germany. It also was affected by U.S. military action against Iran.

Those factors boosted interest rates higher by raising inflation

prospects.

``There`s bedlam and panic out there right now,`` said Larry Wachtel of

Prudential-Bache Securities Inc. in the midst of the selloff. But he predicted that ``at some point somebody will take a stand.``

The correction that began in August had erased more than 20 percent from

the peak of 2722.42 points reached Aug. 25. The average was at 1895.95 at the beginning of the year.

Most of the damage had been done in the last two weeks, when the average

had fallen 500 points in its steepest decline since the beginning of the bull market that started in 1982.

``They killed them, they killed them real good, and we have no idea where these stocks are going to go from here,`` said trader Bill Lord of Shearson

Lehman Brothers Inc.

The stock market edged to a fractional gain at the start of trading, as

investors tried to regroup after Friday`s disastrous fall.

But a further collapse in bond prices and the dollar knocked stocks into

the minus column and the selling in the equity market gained momentum.

Bonds were trading with wide losses late in the morning. The benchmark

30-year government bond yield fell nearly 2 points at first, but cut its loss in half by noon. Its yield of 10.32 percent was near the two-year high.

prices drop, interest rates rise.

Stock markets in London and Tokyo also were in a tailspin. London`s

losses were even wider than New York`s. The British Financial Times/Stock

Exchange 100 index plunged by 245 points.

Declines in the stock market in recent years have resulted in eye-popping point losses that set new records.

But the latest selloff was the first of the magnitude of the Oct. 28,

1929, record fall that heralded the Great Depression.

``If someone was betting on an October massacre, they sure got one,``

said Peter Furniss of Smith Barney, Harris Upham & Co.

In Chicago, losses in stock futures, agreements to buy or sell big

baskets of shares in the future with little money down, mounted quickly in

volatile trading.

Some stock market analysts said that when the futures fell to a discount

it sent heavy new waves of selling into stocks. When they began to trade at a premium, they sparked somewhat of a recovery.

Some analysts have been forecasting a big correction to erase some of the frothy excesses of a market that this year had jumped 45 percent at the peak

and has tripled the value of stocks in five years.

The great bull market began in August, 1982, when the Dow industrials

were at 775 and celebrated its fifth anniverary with a summer rally to

2722.42.

The technical analyst whose bearish advisory was considered a factor in

the plunge that began two weeks ago, ``Elliott Wave theorist`` Robert

Prechter, sees a rebound in 1988 and expects the Dow index to hit 3650. But he and other analysts have been relucant to call for any strong recovery soon.

Playing down the importance of the warnings of technical analysts,

economists say the market may be reflecting concern that higher interest rates will bring an economic slowdown next year. Consumer confidence and housing and business activity are all likely to be dampened.

Most economists see the poor trade performance of the U.S. as the most

worrying aspect of the economy, causing pressures on the dollar and a rise in interest rates. A huge $15.68 billion August deficit announced last week was

seen as the major economic news that contributed to the decline.

The dilemma is that a lower dollar is a two-edged sword for the American

economy. Though its weakness theoretically spurs exports, it also causes

investors to shun U.S. securities.

But the Reagan administration, frustrated by apparent credit tightening

among trading partners and the failure of the deficit to fall, has threatened to push the dollar still lower to aid U.S. manufacturers.

Caption:

PHOTO

Caption:

PHOTO: AP Laserphoto. Activity is frenzied on the floor of the New

York Stock Exchange Monday as the ticker fell as much as 100 minutes

behind.

Paper: The Atlanta Journal and The Atlanta Constitution

Title: NYSE specialist: `It was worse than I ever feared'

Date: October 20, 1987

NEW YORK - To a weary Jim Jacobson, there was no doubting it, and there was no hesitation in his answer.

"It was a crash," Jacobson, a 42-uear-old director and floor specialist at the New York Stock Exchange (NYSE), said Monday night after the worst day in the stock market's history.

"It was worse than I ever feared it would be," said Jacobson, who has worked at the NYSE for 19 years. "I never thought there would be a day like this.

The average volume in '68 was 15 million shares, maybe even less than that."

He shook his head in dismay and stared blankly. He asked a secretary to check on the volume numbers as well as where the Dow closed at. She told him the Dow lost a record 508 points, on astonishing volume of 604.4 million shares.

"I think the last 200 points I didn't see," Jacobson said. They came very quick.

"It was a crash. It was as close to a crash as you'll ever see," he said.

Then, noting that John Phelan, chairman of the NYSE, had characterized the debacle as a "meltdown," Jacobson sighed: "I don't know what it was, but I don't ever want to do it again."

Jacobson, who earned degrees from Trinity College in economics and history in 1968, said he knew Friday, when the Dow Jones industrial average plunged over 108 points, that Monday would be a very bad day.

"One of the major fears that a number of smart people had is about what would happen if you had a combination of futures related selling, plus mutual fund redemptions, plus margin selling at the same time," he said.

"That's what happened."

But he said the worst he imagined was that the Dow would drop "150 to 200 poi nts."

Jacobson predicted that the market might recover later this week, but that trading will be grim again Tuesday "until we can get some semblance of an equilibrium, where we can find some stability. I don't know what level that's going to come from."

He said he was surprised but not shocked at the magnitude of Monday's selling.

"There was very little rallying. It was just wave after wave after wave of selling," he said.

"The floor itself, on the floor there wasn't hysteria. The people that man th e floor are highly professional and handle themselves that way. But there was a tremendous amount of strain.

"Don't forget, a lot of these orders are routed electronically. They don't have a heart. They don't have any emotion."

By the time the session ended, the 2,500 people on the floor were drained and exhausted, he said. When the closing bell sounded, there was an audible groan from the floor, and a brief cheer. "When I came in this morning I fully expected us to go down," he said. "I'm going to go out and have a couple of drinks and come in tomorrow and do it all again," Jacobson said.

Author: HENDRICK, BILL

Section: BUSINESS

Page: E/2

Author: From Chicago Tribune wires.

Section: NEWS

Page: 1

Paper: The Atlanta Journal and The Atlanta Constitution

Title: Dow falls record 508 points, paces worldwide avalanche of sales, losses

Date: October 20, 1987

NEW YORK - The stock market took its deepest dive ever Monday, as the Dow Jones industrial average fell a record 508.32 points.

NEW YORK - The stock market took its deepest dive ever Monday, greater by any measure than the worst daily drop of the 1929 stock market crash.

Leading an avalanche among markets worldwide, the bellwether Dow Jones industrial average plunged a record 508.32 points, nearly five times the 108-point drop it suffered Friday, the previous record fall in terms of points.

Only gold and fixed-income investments seemed to escape Monday's carnage.

Stock markets worldwide opened in panic today after the historic U.S.

plunge. The Hong Kong stock market announced today that it had suspended trading for the rest of the week.

In panic selling that fed on itself with the help of computer-prompted sell orders, the Dow lost 22.6 percent of its value Monday, wiping out more than a year of impressive gains.

By comparison, the greatest previous percentage drop in the Dow - on Monday, Oct. 28, 1929 - was 12.82 percent. On the two worst days of the 1929 crash, the Dow fell a combined 23 percent.

The combined drop of last Friday and Monday was 26 percent.

The Dow closed Monday at 1,738.74, the lowest level since April 7, 1986.

Since its peak Aug. 25, the Dow has lost 36 percent of its value.

Volume on the New York Stock Exchange (NYSE) was a frantic 604 million shares, nearly twice the previous record of 338 million shares traded Friday and more than three times the average volume.

John Phelan, NYSE chairman, echoing many analysts and observers, said Monday's panic sell-off was exaggerated by a practice called program trading, which has caused extreme volatility on the stock market for several years. In it, computers are programmed to sell or buy vast chunks of stocks automatically when they hit pre-set prices.

"We're unleashing forces that are awfully difficult to measure or tell where they're going to end up," said John Bachmann, managing director of Maryland, Mo.-based Edward D. Jones & Co. brokerage. "When these programs activate simultaneously, that creates a lot of short-term volatility in the market."

Traders said the problems began in the Far East, where markets plunged in reaction to Friday's U.S. stock losses. They said the unloading that began Monday morning was heightened by uncertainty surrounding U.S. involvement in the Persian Gulf.

Apparently beset with an increasing lack of confidence in the Reagan administration's ability to cope with the current financial woes, investors seemed to sense the end of the historic bull market.

The Dow plummeted 200 points in the first 90 minutes of trading, and then began to recover. By early afternoon, the Dow and other broader indexes had begun plunging without a rest.

By late in the day, panic had set in.

Richard Torrenzano, an NYSE vice president, said Monday afternoon that the exchange was running "very smoothly," but he acknowledged that NYSE computers had been tested to handle a maximum daily volume of only about 400 million shares.

Asked what the greatest test of the system's capacity had ever been, Torrenzano said, "We're in it."

The Big Board composite tape, which relays prices to brokers, was more than 90 minutes behind by the end of the day. The tape usually lags by only a few minutes, even in fairly heavy trading.

Owing to the extraordinary volume, the Pacific Stock Exchange closed a half-hour early Monday, at 4 p.m. EDT.

At 4 p.m., as the clock on one wall of the historic NYSE floor ticked off the final seconds, the NYSE closed with a literally thunderous roar. The closing bell tried to compete with a noisy throng that sounded like a frenzied college football crowd.

Hundreds of brokers threw tickets into the air. Many others threw up their arms up in stunned and disbelieving frustration.

Thousands of curious spectators, intent on witnessing a day in history, lined up in from of the MYSE building in the dark canyons of lower Manhattan.

Many were joking, but many more appeared numb.

"I think it's sad," said Juan Sanquiche, a guard near the door to the floor of the exchange. "This might have some real bad consequences. People might lose their jobs."

A colleague, Rich Bartolotta, shook his head in agreement. Asked how he felt about witnessing history, he replied, "It's time-and-a-half."

To Sid Dorr, a trader at Robinson-Humphrey Company Inc. in Atlanta, the plunge was a "complete panic."

"This is 1929," said Ralph Bloch, a respected market analyst for Raymond, James & Asssociates Inc. in St. Petersburg, Fla. "We've just had five years of joy and beauty, but it's over."

Said a New York-based trader, "About the only good thing you can say about the day is that it generated a lot of commissions."

President Reagan, trying to calm fears created by Monday's plunge, said "I don't think anyone should panic, because all the economic indicators are solid.

"I think everyone is a little puzzled because - I don't know what meaning it might have - because all the business indices are up," the president told reporters. "There is nothing wrong with the economy."

The NYSE's Phelan tried to reassure investors by asserting that the market had overreacted to external factors. The U.S. economy is healthy, and inflation is under control, Phelan insisted.

The stock market, he noted, had been going up for more than five years and was overdue for what he characterized as a significant correction. He also said rising interest rates, the weak U.S. dollar and the problems with Iran "all have come together in a confluence" to cause the skid.

"At some point a reaction to the bull market was due," Phelan said. "But this was a Lulu. It is fortunate that it came at a time when the economy is strong."

Phelan said Monday's escalation of U.S. involvement in the Persian Gulf also contributed to the stock market's grim mood.

Earnings of U.S. corporations have been "excellent," Phelan said at a press conference after the close, a tangle of TV microphones at his chin. "I hope there is no long-term impact on the economy."

Phelan said he does not sense a loss of confidence in the world economy, and that the economic fundamentals remained strong, but he said the world globalization of the markets had contributed to the debacle.

"We don't know where this market will end up," Phelan said. "Obviously, we're concerned."

The White House said in a statement that Reagan had directed aids to consult with the heads of the Federal Reserve, the Securities and Exchange Commission (SEC), the NYSE, the Chicago Commodities and Futures Exchanges and leaders of the financial community about the market's plunge.

The SEC said at midday that it was "concerned" about the market plunge and was watching the situation. It made no further statements during the frenzied trading.

SEC Chairman David Ruder said recently that the commission might halt trading in the event of market panic.

The stock market was continuing last week's rout, in which the Dow -the best-known indicator of U.S. stock performance - fell 235.48, losing 9.49 percent of its value. The Dow closed Friday at 2,246.73, off a record 108.35 points for the day and off 475.68 since its high of 2,722.42 on August 25.

Losses in the stock-futures market Monday also set records.

The dollar closed lower against all major currencies except the Canadian dollar. The dollar fell to 1.7715 West German marks from just under 1.7975 late Friday, and dropped to 141.35 Japanese yen from 142.45.

Gold, traditionally a shelter in bad times, rose in price Monday.

Republic National Bank in New York quoted a late bid for gold of $486.50 a troy ounce, up $15.50 from Friday's late bid. Gold has not traded as high since Feb. 18, 1983, when it closed at $505.70 per troy ounce on the New York Commodity Exchange.

Some analysts said the gold price increase was disappointing in light of the extreme activity in the stock market.

"One would think gold would be a haven for money, but it's starting to look like there's so much money being lost in the stock market that there's nothing left to put into gold," said one analyst who requested anonymity.

In London, Europe's largest bullion market, gold closed at a bid of $484.50 a troy ounce, up $18.50. In Zurich, gold closed at a bid of $488.50, up $21 from Friday. Earlier in Hong Kong, gold gained $9.53 to close at a bid of $481.97.

The market for fixed-income investments received a suddent boos from Monday's devastation in stocks.

"As the stock market continues to come down," said one U.S. pension fund portfolio manager, "there's more of a prevalent feeling that bonds will outperform stocks over time."

The Treasury's closely watched 30-year bond soared 1.625 points, or $16.25 for every $1,000 in face value. The bond's yield, which moves opposite to its price, tumbled to 9.94 percent from 10.17 late Friday.

The bond market was reacting not only to confirmation of the U.S. strike Monday on Iranian oil platforms, but also to Treasury Secretary James Baker's comments over the weekend that had sent the dollar down sharply against the West German mark.

While the dollar typically rises on news of Middle East strife, it remained near the lows again the mark because of Baker's comments.

On the NBC-TV program "Meet the Press," Baker said, "We will not sit back in this country and watch surplus countries jack up their interest rates and squeeze growth worldwide on the expectation that the United States somehow will follow by raising its interest rates."

Baker said tax increase bills approved by House and Senate committees last we ek helped fuel the market fall in which the Dow industrial average suffered its largest weekly decline since World War II.

Stock prices fell by record amounts on the London Stock Exhange in panicked selling. The three biggest Pacific stock markets were in a free fall Monday, with those in Hong Kong and Sydney, Australia, also experiencing their biggest one-day drops ever. Investors scrambled to sell their shares in the wake of last week's record sell-off on Wall Street

"I'm cleaning the blood off my hands," said one broker in Hong Kong, where the Hang Seng index had dropped more than 420 points shortly before the close.

"Tokyo and Wall Street are psychologically linked,'' said one broker. "There was just one factor - New York," said a senior broker at Nomura Securities, Japan's biggest brokerage firm.

The Associated Press and Dow Jones News Service contributed to this report.

Author: HENDRICK, BILL MALLARD, W MORGAN

Section: NATIONAL NEWS

Page: A/1