When Did The Stock Market Crash? A List Of U.S. Markets’ Worst Declines [Dow Jones Industrial Average 2 Minute, SPDR S&P 500 ETF Trust]

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May 13, 2015 11:07am NASDAQ:QQQ NYSE:DIA

wall-street-etfTara Clarke:  Stock market crashes have obliterated trillions in wealth from the economy.


In 1929, more than $30 billion was lost on Black Tuesday.

Black Monday in 1987 saw the Dow drop 22.6% in a single day – a $500 billion loss of value.

Most recently, $1 trillion in market value disappeared in just 20 minutes in the Flash Crash of 2010.

when did the stock market crash

Those are just a few examples.

Our comprehensive guide answers the question, “When did the stock market crash?” in U.S. history – and explains why each jaw-dropping event occurred…

When Did the Stock Market Crash? A List of U.S. Markets’ Worst Declines

There have been a total of 14 U.S. stock market crashes post-1800.

Each one was triggered either by a speculative bubble collapse, an economic crisis, or a major catastrophic event:

Name Dates Details
Panic of 1819 1819 Stock Market Crash: 54% fall in index of export staples from August 1818 to June 1819; 88% drop in public land sales from 1818 to 1820. America’s first great economic crisis and depression. Three triggers provoked this downturn. First, a bubble burst – speculation in public lands. Second, in the aftermath of the Napoleonic wars, the Second Bank of the United States (BUS), the nation’s central bank back then, sharply contracted its line of credit to curb speculation. Third, banks nationwide flooded the market with too much paper money.A wave of bankruptcies and foreclosures emerged, and debtors’ prisons were overflowing. More than 1 million Americans (10%) were out of work.
Panic of 1837 May 10, 1837 Stock Market Crash: 63% for railroad stocks; 32% for banking and insurance stocks. Some blamed former U.S. presidents Andrew Jackson and his successor Martin Van Buren for the Panic that was followed by five years of depression. Hard-money advocate Jackson clashed with the BUS. Jackson refused to renew the charter of BUS, which resulted in a withdrawal of government funds from the bank and a panic. Van Buren refused to intervene to fix the crisis, believing it would settle on its own.Others blamed the panic on the BUS, for funding rampant land speculation (the sale of public lands increased fivefold between 1834 and 1836 due to Indian removal). The institution was also accused of introducing inflationary fiat money at excess – an all-too familiar criticism of our modern-day central bank…
Panic of 1857 1857 Stock Market Crash: 50% from 1857-1858. The Panic of 1857 can be chalked up to two events. First, in September, 30,000 pounds of gold were lost at sea in a shipment from the San Francisco Mint to east coast banks. Second, the Ohio Life and Insurance Co. over-speculated with risky railroad investments and embezzlement. Losses totaled over $5 million. It failed, sparking panic on Wall Street.By the end of 1857, roughly 900 mercantile firms shuttered their doors and more than 5,000 businesses failed nationwide. Hundreds of thousands lost their fortunes, including then-future U.S. President Ulysses S. Grant. Markets didn’t fully recover until 1859.
Black Friday Sept. 24, 1869 Stock Market Crash: 20% on the day. The U.S. government needed funds to rebuild after the Civil War. It took on a large amount of public debt, with the idea the “greenbacks” would be bought back with gold.Meanwhile, two men – Jay Gould and James Fisk – tried to capitalize by cornering the gold market. They caused the price of gold to skyrocket, and the stock market crashed on “Black Friday.”Former U.S. President Ulysses S. Grant managed to stabilize the economy by releasing gold into the market, but thousands still lost everything they had.
Panic of 1893 May 3, 1893 Stock Market Crash: 8.8% between April and May. Another railroad speculation bubble popped when two of the country’s largest employers, the Philadelphia and Reading Railroad and the National Cordage Co., collapsed. National Cordage stock was the most active on the market at the time – it fell 19 points on May 3 and 4. It fell, in total, from 75 in February to 18 ¾ by May 4. Banks called the loans to National Cordage, and the business went into receivership on May 4. Brokerage firms who were speculating the stock were forced to suspend operations. Solvency questions sparked panic, and bank runs began.Unemployment soared to 19% as more than 500 banks (5% of all American banks) failed and a whopping 16,000 businesses went bankrupt by the end of the year. More than $1 billion worth of bonds were defaulted. Layoffs put people on the street as they could no longer pay their rents and mortgages.
Panic of 1901 1901 – 1903 Stock Market Crash: 46% from June 1901 to November 1903.The first-ever stock market crash on the New York Stock Exchange originated from a fight to control U.S. railroads.E. H. Harriman controlled Union Pacific, while James J. Hill controlled Northern Pacific Railway. The two men tried to the corner the market – Northern Pacific stock was quoted at $150.00 a share on May 6, 1901, but traded behind closed doors for as much as $1,000.00 a share.

Ultimately Harriman and Hill negated one another, but the smaller fortunes of other investors were destroyed in the process. Around $40 million to $75 million worth of stock was lost.

Panic of 1907 October 1907 Stock Market Crash: 50% from its peak the year before. The Great San Francisco Earthquake hit in April 1906 and devastated the city. The government poured in aid, stressing money supply. Then in late 1906, another stressor came when the Bank of England raised interest rates. In July 1907, the copper market collapsed, and in August the Standard Oil Company was fined $29 million for antitrust violations. Together the events kicked off a 24% decline in stock market value from January through September 1907.As stocks continued to decline, a stock manipulation scheme gone awry in October 1907 kicked off the panic. Banks that lent money to the scheme, which was an investor’s attempt to corner the market on United Coppery Company stock, suffered runs that spread across the nation. New York’s third-largest trust, Knickerbocker, collapsed (that’s why the Panic of 1907 is also called the “Knickerbocker Crisis”), and panic spread further.

Stocks fell almost 50% from their peak the year before in only three weeks. Historians believe but for the actions of financier J. P. Morgan, who gave over huge sums of his own money and convinced other bankers to do the same to shore up the banking system, the crash would have worsened.Note that this crisis gave rise to the creation of the Federal Reserve System.

Wall Street Crash of 1929 1929-1932 Stock Market Crash: 48% from September to November 1929; 86% from April 1930 to July 1932. The litmus test for all depressions and recessions, this devastating stock market crash kicked off the ten-year-long Great Depression.A speculative bubble in the manufacturing industry took hold in the 1920s, after the end of World War I. In the first six months of 1926 alone, combined net profits of 536 manufacturing and trading companies increased 36.6%. The Dow Jones gained more than 20% between June and September 1929.

People poured wealth into the stock market, even borrowing money to invest. By August 1929, brokers were lending to individual investors two-thirds of the face value of stocks. More than $8.5 billion was out on loan – more than the entire amount of U.S. currency in circulation at the time.

The highly speculative stock prices began to decline in September 1929, and on Oct. 18, the real fall began. A panic set in, and on Oct. 24, “Black Thursday,” the market lost 11% of its value at opening bell on record-breaking high volume. Banks and investment companies attempted to stem the bleeding by buying up huge blocks of shares, but another giant 13% drop hit the following “Black Monday.” The next day, “Black Tuesday,” saw some 16 million shares traded, and the Dow slid 12%. The volume traded that day – a record 16 million shares – was not seen again for almost 40 years.

By the time the market bottomed out in 1932, the Dow had lost almost 90% of its value. By 1933, roughly half of all U.S. banks had failed. Unemployment approached 15 million people (30% of the workforce). Stock prices didn’t reach pre-crash levels for 25 years.

 

Kennedy Slide of 1962 May 28, 1962 Stock Market Crash: 22.5% from 1961-1962. From late 1961 to the first half of 1962, the S&P 500 lost 22.5%. This is called the “Kennedy Slide” because it was the first market decline since the Wall Street Crash of 1929, and occurred during former U.S. President John F. Kennedy’s term.Former head of the American Stock Exchange Edwin Posner attributed the drop to an adjustment to more realistic levels after a long period of economic boom.
Black Monday Oct. 19, 1987 Stock Market Crash: 22.6% on the day. The stock market fell 22.6% – the largest percentage single-day loss in Dow Jones history – and obliterated $503 billion on “Black Monday.” Stock markets around the world came crashing down, beginning in Hong Kong, spreading its tendrils west to Europe, and finally finding U.S. markets.There are a few theories regarding the cause of Black Monday, but the most popular is program trading.

“Program trading” is a type of securities trading in which groups of 15 stocks or more are traded simultaneously based on preexisting factors via computer program. Investors use this method when they wish to trade a large number of stocks at the same time, or to take advantage of a window of price discrepancies between markets (arbitrage).

In the late 1980s, computer technology became more common, leading to a burst of program trading use on Wall Street. The public largely blamed program trading for blindly selling stocks as the market dropped, exacerbating the crash. Whether that was actually the case, or the sheer novelty of mass program trading caused a general distrust of it, is debatable. Some other theories on what caused Black Monday are overvaluation, illiquidity, and market psychology.

Friday the 13th Mini-Crash Oct 13, 1989 Stock Market Crash: 6.9% on the day. A $6.75 billion leveraged buyout of UAL Corp., parent company of United Airlines, fell through when the Associate of Flight Attendants pulled out. This triggered the collapse of the junk bond market. Moments after the deal’s breakdown hit the news, a stock market crash began. The Dow Jones lost 6.91% by closing bell. The Nasdaq lost 3.09%, and the S&P 500 fell 6.12%.
Dot-Com Bubble March 10, 2000 Stock Market Crash: 78% from March 10, 2000, to Oct. 9, 2002. The Internet commercialized in 1995, creating a speculative bubble from 1997 to 2000. Investors were willing to overlook traditional metrics like P/E ratios. People quit their jobs to become day traders. Millionaires were made overnight.But the bubble’s collapse started in 1999, and the stock market crashed from 2000 to 2002. From March 2000 to October 2002, $5 trillion in market value was eviscerated. The Nasdaq fell 78% from 5,046 to 1,114 – that high wasn’t seen again until 15 years later. Some companies failed completely, like Pets.com. Others survived but saw a large drop in share price, like Cisco, which lost 86%. And a rare few, like Amazon.com Inc. (Nasdaq: AMZN) and Google Inc. (Nasdaq: GOOG, GOOGL) weathered the storm – shares are now worth upwards of 3,000% more than they were in dot-com bubble days.
Financial crisis of 2007-08 2007-2008 Stock Market Crash: 45% from 2007-2008. On Sept. 16, 2008, U.S. financial institutions began to collapse due to exposure of securities to packaged subprime loans and credit default swaps. The events devolved into a global crisis. Banks failed in Europe, and stocks and commodities plummeted worldwide.On Sept. 28, 2007, the Dow dropped 777.68 points, obliterating $1.2 trillion in market value. It’s the biggest single-day crash in Dow Jones history. Behind the crash was the U.S. House of Representatives’ rejection of the government’s $700 billion bank bailout plan.

News that Wachovia (which was acquired by Wells Fargo in 2008) had to sell its banking assets to Citigroup (NYSE: C) the same day didn’t help, nor did the collapse of European banks.

Amidst the subprime crisis, the Dow’s second-biggest single-day drop happened six days later on Oct. 15, 2008. This time, recession talk fueled the 7.9% decline. A weak sales report, bleak forecasts from the U.S. Federal Reserve, and sober comments from Fed Chairman Ben Bernanke all contributed to the day’s plummet. (Which was still far off from the largest-everpercentage loss – 22.6% on “Black Monday,” Oct. 19, 1987.)

Subprime financial crisis-related events that triggered the top two largest single-day Dow drops also account for the fourth-, fifth-, and tenth-largest. The Dow hit an (at the time) all-time high on Oct. 9, 2007, closing at 14,164.43; by March 5, 2009 – a little under 18 months later – it had fallen more than 50% to 6,594.44.

2010 Flash Crash May 6, 2010 Stock Market Crash: 9% on the day. The Dow dropped 1,000 points in 20 minutes. High-frequency traders were the culprit (more on that here), and there have been more “mini-crashes” – though less severe – since.

Money MorningWritten By Tara Clarke From Money Morning

We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the flattening of the world continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially; and a technological revolution even in the most distant markets on the planet.And MoneyMorning is here to help investors profit handsomely on this seismic shift in theglobal economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.


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