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Dow jones going down

Dividend University

Inside the 10 Worst Days of the Dow

Oct 31, 2019


Recessions do not just happen, they happen for a reason. These reasons vary, but each recession affects certain economic areas, including unemployment rates, GDP and investments. Although they may be predictable for analysts and economists, the average investor may not see a downfall coming.

Although most recessions are not nearly as devastating as the 2008 crisis, any recession has the potential to bring down your investments significantly. It is important for investors to pay attention to events that could have a negative effect on their portfolio.

This brings us to this article where we highlight the Dow’s 10 worst single trading sessions.


Click here to take a look at Dow’s 10 best trading days.


1. October 19, 1987: Black Monday (-22.6%)


On October 19, 1987, a stock market crash in Hong Kong spread throughout the world, causing the Dow to fall over 22% in a single day. This historic day would be known as Black Monday and it is the most the Dow has ever declined in a single day since The Great Depression. When the market closed on Monday, the Dow had lost 508 points to end at 1,738.74.

Despite this being such a significant fall, there was no single event that caused this collapse. At the time, many investors were worried about new computerized trading programs and inflation. It was widely feared that this decline would cause a recession, but the market recovered in just two days.

Be sure to read the Dividend Investor’s Guide to Measuring Risk.


2. October 28, 1929: Warning Signs of the Great Depression (-12.8%)


The period between October 24, 1929, and October 28, 1929, represent one of the worst times for the U.S. stock market and will be remembered as the “Wall Street Crash of 1929”. The first day of the crash on October 24 is often referred to as “Black Thursday” when Wall Street bankers managed to prevent a major dip in the index by limiting the daily decline to just 2% after the index dropped by 11% during the early trading hours.

However, bankers couldn’t prevent the occurrence of “Black Monday,” when the Dow declined by 12.8% on October 28. This day is often referred to as the worst day of the 1929 Crash.

The 1929 crash mainly resulted from an asset bubble that saw the Dow on a bullish run for nearly a decade. Moreover, margin buying had become commonplace, intensifying concerns around asset valuations.


3. October 29, 1929: Black Tuesday (-11.7%)


“Black Monday” was immediately followed by “Black Tuesday”, which recorded trading volumes. The Dow plunged by 11.7%. This was despite the fact the wealthy investors, including the Rockefeller family, tried to instill investors’ confidence by buying up large chunks of shares.

On this day, the crash impacted not only illiquid stocks like Transamerica Corp., which lost more than 60% of its value, but also giants like GM (GM) and Standard Oil.


4. December 18, 1899: Dow Drops Amidst Panic Over Liquidity Crunch (-8.7%)


By December 1899, the U.S. had suffered a series of investors’ panic that saw the failure of companies like John P. Squire & Co, a Boston-based pork packager, and banks like Broadway National Bank. The economic scenario was not helping either, with deflationary pressure, dropping silver reserves and declining copper stocks.

As a result, trading of several firms was suspended on the stock exchange and the banking system, led by the likes of J.P. Morgan & Co., had to come to the rescue.

Panic took over investors’ minds, leading to an 8.7% dip in the Dow.


5. March 14, 1907: Dow Provides a Precursor to the Panic of 1907 (-8.2%)


The panic of 1907 was a significant event in the U.S. economic history triggered by a group of bankers who primarily speculated over rising copper prices. Unfortunately, the gamble proved wrong, leading to a run on the banks, including the Knickerbocker Trust – one of the largest banks in New York at the time.

However, before the panic started around October 1907, the stock market had started showing signs of deterioration in March when railroad stocks dragged down the Dow. The 8.2% drop on March 14, 1907, was the second-worst single-day drop in the Dow’s history.


6. October 26, 1987: The Dow Dips Again (-8%)


On Monday, October 26, 1987, one week after Black Monday, the Dow took another plunge after recovering from its 22.6% fall on the 19th. Although the fall was much smaller than the decline on Black Monday, it was still the second biggest decline since The Great Depression. By the end of the trading day, the Dow fell 8% to 1,793.93.

The decline was based solely on investor and government budget fears following Black Monday. On this day, for every 14 stocks that declined, just one rose. The biggest loser of the day was Enron, which fell 29%.


7. October 15, 2008: Big Bank CEOs Attend Meeting (-7.9%)


The Dow sank 7.9%, or 733 points to 8,577.91, on this day following a weak retail sales report. Retail sales had reached a three year low, declining 1.2% in September, while analysts expected a 0.7% decline. The drop was also a result of a speech given by Federal Reserve Chairman Ben Bernanke regarding a slow economic recovery. In addition, CEOs from the nine largest banks met the day before and signed an agreement to sell shares to the government. By the evening of October 14, 2008, the largest intervention in U.S. banking history since The Great Depression was in progress.


8. October 18, 1937: Dow Falls on Corporate & Legal Fears (-7.8%)


On October 18, 1937, the U.S. was in the middle of its first recession since The Great Depression. After the Depression, the U.S. was struggling to get back on its feet and government was cutting spending and raising taxes. On this day, the Dow fell 7.8% to 125.73 after negative reports from both the corporate and legal sectors. News that steel production was declining also shook up investors. These reports sent shares of U.S. Steel (X ) falling 10%.


9. December 1, 2008: The U.S. Declares Recession (-7.7%)


The economy had been sinking for months, and on December 1, 2008, the National Bureau of Economic Research declared that the country had officially been in a recession since December 2007. In the 10 months prior to this announcement, 1.2 million jobs were lost in the U.S. Additionally, reports were issued stating that this recession was expected to continue for at least another year. The Dow plummeted 679 points, or 7.7%, on this day, closing the market day at 8,149.09.


10. October 9, 2008: Bank Bailout Is Discussed (-7.3%)


Following bank bailout discussions, the Dow fell 679 points, or 7.3% to 8,579.19 – the first time it was below 9,000 in five years. Reports of bank bailouts were in the news since the collapse of Lehman Brothers, which occurred a month prior. Automakers also had a rough day after an auto sales forecast fell short of expectations. General Motors (GM) sunk 31% and Ford Motor Company (F) dropped 21%.

Click here to learn how the Dow 30 reacts to major events.


The Bottom Line


Wall Street has witnessed numerous market-altering events over the years. And as shown above, the Dow has not always reacted “rationally” or in the same way it had to a similar event. This in-depth look at the Dow’s worst trading days gives us an idea about how big stock market indices like the Dow can be hit hard by deteriorating economic events.

Be sure to visit the news section here to keep up to date with the latest news around dividend investing.

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