This Day In Market History: Market 'Circuit Breaker' Tripped For The First Time

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened: On this day 24 years ago, a stock market sell-off triggered the first ever “circuit breaker” halt.

Where The Market Was: The Dow Jones Industrial Average traded at 7,161.15, and the S&P 500 finished the day at 876.99.

What Else Was Going On In The World? In 1997, Madeleine Albright became the first female U.S. Secretary of State. The Lion King Musical debuted on Broadway. The average cost of a new house was $124,100.

Circuit Breaker Tripped: On Oct. 27, 1997, a panic over the Asian financial crisis, also called the “Asian Contagion,” sent the Dow Jones Industrial Average tumbling 7.2%. The financial crisis began when Thailand decided to no longer peg its local currency to the U.S. dollar. Currency market failures then spread throughout East Asia, dragging down Asian stock markets and creating political upheaval.

At the time, the Dow’s 554.26 drop was its largest single-day point loss in history. Panic was compounded when Oxford Health Plans announced it had overstated its third-quarter revenue by $111 million due to a glitch in its accounting software. The popular growth stock’s market cap dropped by $3.4 in a single day.

The New York Stock Exchange first implemented circuit breakers following the Black Monday crash in 1987. The first circuit breaker is tripped when the market drops 7% from its previous day’s closing price. When the breaker is tripped, all trading is halted for 15 minutes. The October 1997 sell-off was the very first time the circuit breaker was triggered.

As was the case in 1987, buying the 1997 dip was a savvy move. By the end of 1997, the Dow had rebounded by 10.4%.