On this day in 1987 (that's 27 years ago, if you are burdened with a graduate degree),
The Big Board suffered its largest single day percentage loss (22 percent) and its largest one-day point loss up until that day (508 points). No one who was on the floor that day will ever forget it. While it was an unforgettable single day, there were months of events that went into its making.
The first two-thirds of 1987 on Wall Street was nothing short of spectacular. From New Year's Day to shortly before Labor Day, the Dow rallied a rather stunning 43 percent. Fear seemed to disappear, and junior traders laughed at their cautious elders. The brash youngsters told each other to "buy strength" rather than sell it, as each buying wave was soon followed by another.
One thing that helped banish fear was a new process called "portfolio insurance."
It involved use of the newly expanded S&P futures. Somewhat counterintuitively, it involved selling when prices turned down. (remember, this guy's talking about the NYC "big board" equities crowd.
Read: Art Cashin: Market pros fear this most
The rally topped out about Aug. 25, with the Dow Jones Industrial Average hitting 2,722 (less than a tenth of its current numerical value). Interest rates had begun creeping up amid concerns of early signs of inflation. Treasury Secretary James Baker began a rather open debate with the Germans on the relationship of the dollar and the Deutsche mark
(which has now been swallowed up by Europe's single currency).