Stock market today: Dow slips, Nasdaq, S&P 500 rise as the AI trade rebounds

Thirty-nine years ago today, the Dow (DOW) plunged 508 points. That was nearly 23% of its value, gone before the closing bell.

Mike Zaccardi marks the anniversary on X with the next morning’s New York Times front page. Beneath the enormous crash headline, a smaller one asked: “Does 1987 Equal 1929?”

For a little perspective, a Black Monday-sized drop from Friday’s Dow close near 52k would erase roughly 11,750 points.

In this log-scale chart of the S&P 500 on AlphaSpace, you can see the steep drop not far from the left edge.

That would get your attention — and generate some big headlines.

Some of the trouble came from portfolio insurance, a strategy meant to protect investors by selling stock-index futures as prices fell. More selling pushed prices lower, triggering still more selling.

The protection was new at the time and helped feed the panic. It’s not unheard of in financial “innovation” to run amock.

The crash helped usher in circuit breakers, giving markets a timeout when selling gets extreme. The Fed stepped in the next morning before the open, and the Dow recovered 57% of Black Monday’s point loss over the next two sessions.

The crash also prompted President Ronald Reagan to create the President’s Working Group on Financial Markets in March 1988—later nicknamed the “Plunge Protection Team,” or PPT.