This Day In Market History: Dow Breaks Record For Single-Day Drop In 1986

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© Provided by BenzingaEach day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On this day in 1986, the Dow Jones Industrial Average dropped 45.75 points, a new single-day record.

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Where The Market Was: The Dow closed at 1,840.15. The S&P 500 traded at 239.96.

What Else Was Going On In The World? In 1986, the Soviet nuclear reactor at Chernobyl exploded, causing a major nuclear disaster. The U.S. Space Shuttle Challenger disintegrated 73 seconds after launch killing all seven astronauts on board. The average price of a new car was $9,255.

Dow’s Record Drop: On June 9, 1986, a combination of concerns about the market’s record highs and fears surrounding a potential economic slowdown sent the down tumbling 2.4% on the day. The 45.75-point drop was the largest single-day decline in the Dow’s history at the time.

Percentage-wise, it was far from the worst day in history. The Dow dropped 12.9% in a single day back on Oct. 28, 1929. However, that decline represented just 38.33 points.

The media blamed the June 1986 sell-off partially on computer trading algorithms, with the Washington Post citing the “growing influence of program trading.”

At the time, investors were reportedly concerned about lagging corporate profits, the unwillingness of the Federal Reserve to lower interest rates further and stagnant inflation rates.

As has been the case throughout history, long-term investors who bought the dip were rewarded for their timing. Over the next 12 months following the June 9 sell-off, the Dow Jones gained 27.8%.

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