Yesterday did not go well for international stock markets. After drops in other exchanges around the world, the U.S. stock market set a record and not a good one.
The Dow Jones Industrial Average is an index of 30 significant stocks. It includes companies like Disney and McDonalds and it's one major indicator of how the market as a whole is doing. The Dow dropped so far so fast yesterday that a circuit breaker kicked in. A temporary stop to trading to give investors a chance to catch their breaths.
It lasted 15 minutes and when everything was said and done with at the end of the day, the Dow had lost more than 2,000 points. Its worst point drop than on any other day in history. What's more important to investors than the points though are percentages. The Dow lost 7.8 percent of its value.
That's not its biggest percentage drop ever but it was its worst day since October of 2008 when the "Great Recession" was dragging down the world economy. Why did this happen? Two main reasons.
One of them was oil prices. They collapsed on Monday after a disagreement over oil production between Saudi Arabia and Russia. They're two major producers of oil and though lower oil prices can translate to lower gas prices, which many drivers see as a good thing. Investors don't like falling oil prices because they often correspond with a weakening global economy. So this was a big reason why there was a sell off in the U.S.
stock market yesterday and that triggered the circuit breaker.
UNIDENTIFIED MALE: It doesn't matter whether the -- the circuit breakers on an electrical box or in the stock market the concept remains the same. If there's too much power, too much force coming down the pipe the circuit breaker kicks in and everything stops. In 1987 with "Black Monday", the Dow Jones Industrials fell more than 500 points. It was a loss of 22.6 percent.
It is still the largest percentage daily fall in the Dow's history. There was a feeling at the time of financial Armageddon. The world was coming to an end. The market decided to put in place various circuit breakers so that trading would be slowed. Those who are in favor of circuit breakers say that when properly used with proper perimeters, the circuit breaker merely allows time for thought.