NEW YORK - U.S. stock prices tumbled in unrelenting waves of selling yesterday, prompting the New York Stock Exchange to halt trading twice as the Dow Jones industrial average of 30 stocks fell to levels that tripped prearranged "circuit breakers" installed after the 1987 stock market crash.
A high hum on the floor of the exchange rose to a roar seconds before the closing bell as the Dow average plummeted a stunning 554.26 points, blowing through the second circuit breaker that is supposed to close stock trading automatically for one hour after a fall of 550 points. The decline was the largest ever in terms of points on the Dow average, but it represented only a 7.2 percent decline.
Several traders said they expect further selling when the U.S. markets open today, as the huge drop here shakes markets around the world. The cascading wave of selling began in Asian markets last summer, but it now girdles the globe, with each market feeding off the anxiety of its neighbors.
Late-night trading in a futures contract based on another popular market index, the Standard & Poor's 500 stock index, quickly reached its downside limit, equal to another 125-point drop in the Dow, before recovering slightly. And selling continued overseas as markets in Australia dropped 8 percent, the Philippines fell 7 percent, Singapore lost 6.6 percent and Tokyo's Nikkei 225 stock was index down 1 percent in early trading.
"It's going to be really ugly tomorrow," predicted Bobby Cohen, a broker on the exchange floor.
The one-day drop to 7161.15 was the Dow's 12th-largest decline ever on a percentage basis, with the popular barometer of blue-chip stocks down 13.3 percent from its peak on Aug. 6, the first drop of more than 10 percent since 1990. Other U.S. stock indicators were also sharply lower, with both the S&P 500 index and the technology-laden Nasdaq Stock Market falling about 7 percent.
U.S. Treasury securities rose, especially those with short-term maturities, as investors looked for a safe port to ride out the storm in other markets. The yield, which moves in opposite direction from prices, on two-year notes slid to 5.63 percent.
Although the numbers are huge and the tensions are high, yesterday's drop does not compare to the chaos and devastation that shook the markets on Oct. 19, 1987, when the Dow average dropped 22.6 percent in a fall of 508 points that strained the very foundations of market systems.
Yesterday's fall still leaves the popular market average up 11 percent for the year.
Yesterday offered the first test of the circuit breakers, which halt trading when the Dow drops first 350 points, and then 200 more points. They are designed to give investors a chance to assess the market damage and, ideally, put in buy orders. But yesterday, when the first 30-minute halt began at 2:35 and investors surveyed the carnage, most decided to sit tight or sell.
The market reopened at 3:05 and took less than half an hour to slide 200 more points. That triggered the second circuit breaker, closing the market 30 minutes early.
"We are in uncharted territory now," said James Maguire, a specialist who handles stock trades on the NYSE floor.
10-28-97
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