This Day in History (28-Oct-1929) – Dow Jones plummets 13% on Black Monday

Between 1924 and 1929, the Dow Jones Industrial Average quadrupled. At that time, it was the longest bull market ever recorded. By 1929, 2 out of every 5 dollars a bank loaned were used to purchase stocks. Market peaked on 3rd  Sep. In the last hour of trading on Thursday, Oct. 23, 1929, stock prices suddenly plummeted. When the closing bell rang at 3 p.m. people were shaken. No one was sure what had just happened. When the market opened again the next day, prices plunged with renewed violence. Stock transactions in those days were printed on ticker tape, which could only produce 285 words a minute. Thirteen million shares changed hands — the highest daily volume in the exchange’s history at that point — and the tape didn’t stop running until 7 PM. The following day, US President Herbert Hoover went on the radio, saying “The fundamental business of the country is on a sound and prosperous basis.”

And then came Black Monday. As soon as the opening bell rang on Oct. 28, prices began to drop. Huge blocks of shares changed hands, as previously impregnable companies like U.S. Steel and General Electric began to tumble. By the end of the day, the Dow had dropped 13%. So many shares changed hands that day that traders didn’t have time to record them all. They worked into the night, sleeping in their offices or on the floor, trying to catch up to be ready for October 29.

As the story goes, the opening bell was never heard on Black Tuesday because the shouts of “Sell! Sell! Sell!” drowned it out. In the first thirty minutes, 3 million shares changed hands and with them, another $2 million disappeared into thin air. Trades happened so quickly that although people knew they were losing money, they didn’t know how much. Brokers called in margins; if stockholders couldn’t pay up, their stocks were sold. So many trades were made — each recorded on a slip of paper — that traders  didn’t know where to store them – ended up stuffing them into trash cans. When the market closed at 3 p.m., more than 16.4 million shares had changed hands, using 15,000 miles of ticker tape paper. The Dow had dropped another 12%.

In total, $25 billion — some $319 billion in today’s dollars — was lost in the 1929 crash. The stock market wouldn’t recover to its pre-crash numbers until 1954.


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