By dropping more than 300 points:
NEW YORK — The Dow Jones industrial average dropped more than 300 points Friday _ the anniversary of the Black Monday crash 20 year ago _ as investors were frightened by lackluster corporate earnings, credit concerns and rising oil prices.
The market turned sharply lower Friday after Standard & Poor’s again reduced its ratings on residential mortgage-backed securities. The latest reduction, on more than 1,400 types of securities, added to investors unease about credit quality.
In addition, mixed results from Dow components 3M Co., Honeywell Inc., and Caterpillar Inc. gave investors little incentive to take chances on the market. And oil prices added to investors’ list of concerns when they briefly moved above the psychological barrier of $90 per barrel for the first time.
In the final hour of trading, the Dow Jones industrial average fell 315.24, or 2.27 percent, to 13,573.72. The Dow is down for the fifth straight session.
Of course, this is nowhere near the magnitude of what happened that day in 1987. For that to be the case, the Dow Jones Average would have to drop more than 3,000 in a single day.
More importantly, it points out how unimportant day-to-day movement in the stock market actually is. In the 20 years since the markets closed on Black Monday, the Dow has gone from 1739 to more than 13,573; an increase of over 11,834 points, or 680%, in twenty years — for an average of 34% per year. The S&P 500 closed around 225 that day, and today stands at 1500, an increase of 1,275 points, or 566%, in twenty years —for an average of 28% per year.
The lesson ? Ignore the day to day movements of the market.
