Perspective on the Stock Market
Making History
This past Tuesday, words and numbers together told the story of one of Wall Street's most remarkable days. A "wild ride," proclaimed The Washington Post. A "roller coaster," commented one New York Times article. A "bungee jump in prices," observed another.
In numerical terms, the Dow Jones Industrial Average and the NASDAQ Composite Index—which track the stock values of the nation's leading companieseach fell by more than 500 points—an extraordinary amount. Then they turned around and made a dramatic recovery by day's end. How does Tuesday's roller coaster ride compare with other famous days in Wall Street history?
On April 4 the Dow Jones Industrial Average (DJIA) lost only 57 points (a point is the unit used to measure the combined gains and losses among thewell-known stocks covered by the average). But earlier in the day, this closely watched indicator of U.S. stocks had fallen 504 points, one of its single greatest losses.
The NASDAQ Composite Index, the stock listing that contains many of the strongest technology companies, was headed for a record loss of its own—575 points—before reversing itself tofinish the day 75 points lower.
Stock analysts offered several explanations for the stock market's behavior. Earlier in the week, a federal judge ruled that Microsoft Corporation, the world's largest software maker, had violated U.S. antitrust laws. The decision shook investors' high-flying confidence in technology stocks, which lost value rapidly.
Another theory focused on the efforts of the U.S. government—mainly through the Federal Reserve—to slowdown an economy that might be growing too quickly. Part of that growth camefrom the skyrocketing prices of stocks, which many experts believed had become much more expensive than they were worth.
- Follow the daily progress ofthe stock market at cnnfn.com.
- Find a lesson plan on understanding the Microsoft antitrust ruling at CNNfyi.com.
The table below provides more information about the performance of the DJIA and NASDAQ averages last Tuesday.
Stock Market Scoreboard
Tuesday, April 4, 2000
| High for Day | Low for Day | Close | Change | |
| Dow Jones Industrial Average | 11,418 | 10,718 | 11,165 | -57 points |
| NASDAQ Composite Index | 4,283 | 3,649 | 4,149 | -75 points |
- The DJIA and the NASDAQ both registered the largest difference ever between their daily highs and lows. Based on the information in the table, calculate these differences.
- The NASDAQ also saw more shares traded than in any single day. The 2.8 billion total surpassed the previous record of 2.2 billion By what percentage did Tuesday's trading volume surpass the past record?
Memories of 1929 and 1987
The sudden decline in stock prices reminded investors and historians of similar drops in the past. After building up steam throughout the "Roaring Twenties," for instance, the New York Stock Exchange reached it's all-time high in September 1929. Throughout the last week of October, though, the market absorbed major losses, culminating in its infamous crash on "Black Tuesday," October 29.
By November, stocks had lost most of their value. Shortly afterwards, the United States entered the Great Depression of the 1930s.
- Learn more about the "Stock Crash of 1929."
A second October surprise occurred in 1987 during another period of prosperity. The Dow Jones Industrial Average dropped 508 points on October 19. The average rebounded in the following days, but its record-breaking plunge earned a place in stock market history.
In the table below, you can compare the low point of the Dow Jones average last Tuesday with these other major collapses. The losses in points only tell part of the story, though. What is more telling is the percentage that the Dow fell on each of these occasions. That's your job to figure out.
Bad Days on Wall Street
| Major DJIA Losses |
Opening
Value |
Low
Point |
Loss
in Points |
Percentage
of Value Lost |
| October 27-28, 1929 | 315 | 245 | ||
| October 19, 1987 | 2,247 | 1,739 | ||
| April 4, 2000 | 11,222 | 10,718 |
- Which loss was the largest in points?
- Which loss was the largest in percentage?
In a Word
The world of high finance has given rise to a language of its own. "Roller coaster rides" and "bungee jumping" can indeed capture the fall and rise of stock prices. Investors who are eager to invest have long been known as "bulls," animals that have a reputation of charging straight ahead, while those who are more than ready to sell are often called "bears," who, contrary to popular belief, are mostly timid.
In all of these cases, metaphors—implied comparisons with ideas that have nothing to do with the stock market—make these descriptions come alive. In the space below, come up with your own metaphors for these features of stock market life.
| Stock Market Features | Your Metaphors |
| Investors who are eager to buy | |
| Investors who are eager to sell | |
| A dramatic rise in stock prices | |
| A dramatic fall in prices |
- You can hone your stock calculation skills with the Calculating Percent Increases and Calculating Percent Decreases sessions in Destination MATH's Mastering Skills and Concepts: Course IV.
- Focus on the characteristics of a line graph to track stocks in the Exploring Line Graphs session of Destination MATH's Mastering Skills and Concepts: Course V.
- You're never too young. Get the Kid's Investment Journal.