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Posted on 7 September 2012 | 2,317 views

The Worst Stock Market Crash in History

The Roaring Twenties, the decade that led up to the Crash, was a time of wealth and excess. Despite the dangers of speculation, many believed that the stock market would continue to rise indefinitely.

The market had been on a six-year run that saw the Dow Jones Industrial Average increase in value fivefold, peaking at 381.17 on September 3, 1929.

Brokers watching the tickers on September 5, 1929, found their confidence shaken by the “permanently high plateau” predicted by economist Irving Fisher that summer as automatic stop-loss orders hastened the declines of several notable stocks. None could have then suspected that they were experiencing the first small drop of the worst bear market in history.

A broad decline hit at the end of the trading day on September 5, 1929. United States Steel (Stock Symbol: X), AT&T (Stock Symbol: T), General Electric (Stock Symbol: GE) and DuPont (Stock Symbol: DD) were among the worst performers — some losing as much as 10% on the day. There were rumors that GE might announce a stock split after the tremendous run-up it had enjoyed over the course of the year, having nearly doubled from its 1929 lows to its price on September 5 — GE’s market cap at the time was about $2.8 billion, which amounted to nearly 3% of U.S. GDP.

On October 24 “Black Thursday“, the market lost 11% of its value at the opening bell on very heavy trading. Over the weekend, the events were covered by the newspapers across the United States. On October 28, “Black Monday“, more investors decided to get out of the market and the slide continued with a record loss in the Dow for the day of 38.33 points, or 13% on the day.

The next day, “Black Tuesday“, October 29, 1929, about 16 million shares were traded, and the Dow lost an additional 30 points, or 12% on the day.

A one-day recovery on October 30, where the Dow regained an additional 28.40 points, or 12% to close at 258.47, the market continued to fall, arriving at an interim bottom on November 13, 1929, with the Dow closing at 198.60. The market then recovered for several months, starting on November 14, with the Dow gaining 18.59 points to close at 217.28, and reaching a secondary closing peak (i.e., bear market rally) of 294.07 on April 17, 1930.

After the Smoot–Hawley Tariff Act was enacted in mid-June, the Dow dropped again, stabilizing above 200. The following year, the Dow embarked on another, much longer, steady slide from April 1931 to July 8, 1932 when it closed at 41.22 — its lowest level of the 20th century, concluding an 89% loss rate for all of the market’s stocks. For most of the 1930s, the Dow began slowly to regain the ground it lost during the 1929 crash and the three years following it, but it would not return to the peak closing of September 3, 1929 until November 23, 1954.

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