European Stars And Stripes (Newspaper) - October 28, 1987, Darmstadt, Hesse                                Magazine typical of recent pandemonium at Slock exchanges around the world was this scene in Sydney Australia. Market nosedive what happened bydarian Caprino associated press Ere Are some Ojuesa Lions Anco answers concerning the volatile Slock Market Why has the Market crashed while Tho question will be debated for decades to come Many experts see the record breaking dive in Slock prices last week As a Vole of no Confidence in i he ability of . And foreign leaders to Cope Wilh the Trade and debt problems afflicting the world Economy. Tie Dow Jones Industrial average suffered its second largest Point loss Ever his monday As investors remained sceptical that the Reagan administration would be Able to Avert severe economic repercussions irom last week s crash investors were worried thai the bulging us Trade and budget deficits would eventually erode the foundations of the 5-year-old economic expansion with interest rates rising in Wesl Germany and Japan they reasoned thai us. In Crest Rales also would have to climb Lokeel foreign investors Horn ruling Money Oul of the Umed slates. Higher interest Rales in Lurn would increase the Odds of a . Recession by squeezing borrowers at a Lime when Many individuals and institutions wore heavily in debt. How substantial was the Market drop substantial enough to have wiped Oul $500 billion in the value of investors  holdings in a single Day last week and Send Shock Waves around the world. The plunge on monday. Oct. 19, of 508 Points in the Dow Jones Industrial average represented a 22.6 percent drop in the prices of Tho 30 Blue Chip stocks that make up the Index qualifying the plunge As the largest in history. The Market Rose in the iwo following sessions recouping almost half the loss but see sawed at the end of the week and nosedive again this monday. How heavy has trading been volume on the new York Slock Exchange hit 604 million shares oct. 19 and 603 million oct. 20. About twice the number of i rads handled on the previous busiest Day. The system is designed Lor about 425 million shares a Day but a typical Day had seen less than 200 million shares change hands in the past week nearly 2 5 billion shares were traded on the Exchange. What effect did volume have on operations Many stocks were late in  to Trade throughout the my week because of order imbalances and a Ong pull the big Board Lapo that carries Price quotes was running to hours ale the wow York and a Norica a Chanyey Cut ind i by two hours last Friday and intended Lojo the same Early this week to give traders and investment houses More Lime to catch up with a deluge of paperwork. What role did program trading play controversial computerized program trading which can move millions of shares of Stock in a Mailer of seconds has Boon Cilcy by some As a key Laylor in the recent crushing volume and wild gyrations in Slock prices. The sir elegy allo pts to lock m profits by taking advantage of Price discrepancies Between stocks Slock Index to lures and options on Index Lulu res. What is the nose s position on program trading the nose asked major program traders not to use Iho nose s main computer delivery system for program Iracki and then Lata asked Ilion not to use inc lactic Lor their own accounts until further notice Exchange officials initially said the limitations were aimed at reducing volume but nose chairman John Phelan admitted Price vol Lilily also was a Factor. The nose plans to examine the practice in conjunction with other exchanges and the securities and Exchange commission. Congress also has promised inquiries could the dire economic retraction that followed on the heels of the crash of 1929 occur again probably not. Many safeguards in place namely Federal Deposit insurance Phil guarantees Bank deposits unemployment insurance and social Security insurance would Likely prevent a repeat of the great depression. The Federal Reserve is unlikely to repeal its 1929 mistake of squeezing Crudi during an economic downturn. In addition the securities investors Protection corp insures brokerage accounts for up to �500,000, and Federal regulations no longer allow investors to buy stocks almost entirely with borrowed Money what happened in the credit markets frightened by Ifie Market s extreme volatility investors sought Refuge in the solely of lined Rale instruments particularly those of the highest Quality the Treasury Bills noles and Bonds guaranteed by the . Government. As Money allowed into these instruments prices Rose and i hair yields fell. As Inte Rosl rates tumbled major american Banks decided to Roll Back heir prime lending Rales a charter1 percentage Point to 9 percent. What effect has the crash had on the average american those who loss Money in the Market will have less Cash available to spend on consumer purchases. Many people n the sea estate Markol said they would Lake a wait and see approach toward Home buying even people who had no slake in the Market could become More wary about pros cols for the future in general. What happened in other markets around the world to use a Well worn Bromide when new York sneezes. The rest of the world catches a cold sleek exchanges in Tokyo and London reported record shall ering plunges Anco smaller exchanges across Europe and Asia also Ell Hong Kong closed its Market oct. 20 for the entire week As now York s roller coaster ride continued through the week other exchanges mirrored its violent up and Down swings what can the Federal Reserve do Trie Nalion s Central Bank must perform a Dehale balancing act. It must keep interest rates High enough to continue to attract foreign investors but not too High to discourage corporations irom borrowing Money to finance expansions. What signals Are investors looking for Tutol Washington investors Are seeking a meaningful reduction of the nation s budget and Prado a elicits president Reagan promised to step up negotiations with the Congress on a budget agreement some speculated that could Lead to a tax increase wednesday october 28. 1337 the stars and stripes Page 13