Learn the stock market › Stock market crashes in history › Lesson 2 of 7
Black Monday 1987
Before the crash
In the twelve months before the high the S&P 500 rose 36%. The Federal Reserve's historians say the Dow had gained 44 percent in seven months by late August, which raised concerns of a bubble. In mid-October came a larger trade deficit than expected, the dollar fell, and markets began taking large daily losses.
The day
On the Monday, markets in Asia were falling before New York opened, and sell orders far outnumbered buyers. The Dow fell 22.6 percent and the S&P 500 20.5%.
| Date | In one day |
|---|---|
| Oct 19, 1987 | −20.5% |
| Oct 26, 1987 | −8.3% |
| Oct 16, 1987 | −5.2% |
| Oct 21, 1987 | +9.1% |
| Oct 20, 1987 | +5.3% |
| Oct 29, 1987 | +4.9% |
It is the largest one-day fall in our history since 1928. Two days later the index rose 9.1%, the largest rise of the whole crash.
Why so much in one day?
The Federal Reserve names several causes. Foreign investors had become more active in US stocks. A new product, portfolio insurance, used options and derivatives in a way that turned losses into more selling. Stocks, options and futures also settled on different schedules, which could force sales, and exchanges had no way to pause trading.
The next day the Fed said it stood ready to supply liquidity, and the largest New York banks raised their lending to securities firms.
What changed
Afterwards came trading halts known as circuit breakers. Today the New York Stock Exchange pauses trading when the S&P 500 falls 7, 13 and 20 percent in a day. Those rules were triggered four times in the crash of 2020.
The way back
S&P 500, 1986–1989
S&P 500The high before the crash
A deep fall in one day need not become a long crash. Counted from Black Monday, the index stood +23.2% a year later and +39.0% three years later. That pattern can't be counted on: three years after the first big fall of 1929 the index was still lower. What has followed large one-day falls in companies and the index is in the study of one-day falls.
| What | Date | S&P 500 |
|---|---|---|
| The high | Aug 25, 1987 | 336.77 points |
| First close 20% below | Oct 19, 1987 | −20% |
| The low | Dec 4, 1987 | −33.5% |
| Back at the high | Jul 26, 1989 | two years |
The index leaves out dividends. Closes through Nov 6, 2026.
Test yourself
What was portfolio insurance?
Sources
- Federal Reserve History, Stock Market Crash of 1987, read November 5, 2026.