Crash of the Century!
On this day in economic and financial history...
Shell-shocked investors swarmed the streets in front of the New York Stock Exchange after the close of trading on Oct. 19, 1987. Some cracked jokes. Some cursed the fickle gods, or their own bad luck. Some stood silently, trying to come to grips with what had happened that day.
October 19, 1987 was Black Monday, when the Dow Jones Industrial Average (INDEX: ^DJI) lost 508 points, 23% of its value, in a single trading session. Nothing so violent had ever occurred in the market before, and nothing has yet matched it in all the trading days that have come since.
By 11 a.m., the Dow had already lost 250 points. Half an hour later, a ray of hope flickered across trading screens. The index climbed fast, reclaiming 150 points of its initial decline by noon. It was all downhill from there. At 12:30 the Dow returned to a 175-point loss. By 2:05 it had hit new lows and had shaved nearly 300 points off its opening value. For a while, the index held at this new depth, but in the final hour, all semblance of stability was blasted apart by its rapid plunge, falling past 350, then 400, then 450, to finally settle at a 508-point loss that left Wall Street dumbstruck.
What caused this staggering loss? Many blamed computerized trading. Others simply attributed it to a widespread panic over inflated stock valuations. Innovative new investment strategies also received some scrutiny. Whatever the cause, market managers moved quickly to ensure it would never happen again. Circuit breakers, now commonly used for wild individual stock fluctuations, were put in place shortly after the crash on a marketwide basis. Marketwide circuit breakers have only been used three times since their implementation: once in 1997, once in 2008, and once in 2010.
The Dow quickly shrugged off the damage of Black Monday. It bottomed out a week later before resuming a march to dot-com-fueled record highs, which was interrupted only briefly by economic weakness and high oil prices during the first Gulf War.
The rise of the West
One of the most important Oct. 19 events in history occurred over 2,000 years ago. On this day in 202 BC, Roman legions destroyed their Carthaginian foes at Zama Regia, in what is now Tunisia. The decisive victory over Hannibal's troops ended the Second Punic War, eliminating Carthage as a threat to Roman hegemony in the Mediterranean. Roman historian Livy would later call it "the most memorable of all wars."
Without this victory, Roman culture might not have spread across the Western world, and our lives might look very different. For one thing, the British Empire might not have risen as it did many centuries later, in the wake of Rome's eventual downfall. That would eventually lead to a second world-changing battle -- which also concluded, as chance would have it, on Oct 19.
The American Revolution came to an unofficial end on this day in 1781 when George Washington accepted the surrender of British lieutenant general Cornwallis. It was the last major military engagement of the war, and it forced the British to enter peace negotiations with its rebellious territories. The later importance of an independent United States to the global economy should require no further explanation.
Power of the atom
The world's first private commercial-scale nuclear power plant began to supply electricity to Californians on Oct. 19. 1957. Built by Dow component General Electric (NYS: GE) and Pacific Gas and Electric (NYS: PCG) , the Vallecitos plant remained operational for a decade, generating 30 megawatts of electricity for the California power grid.
Today, 35 of the 104 nuclear reactors in the United States use GE designs, generating over 20% of the nation's electrical output, or about 807 billion kilowatt-hours. Exelon (NYS: EXC) and Entergy (NYS: ETR) are the country's two largest nuclear-producing utilities, with 17 and 10 gigawatts, or two-thirds and one-third of their total electrical capacity, respectively, coming from nuclear plants.
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