Black Tuesday

Black Tuesday was Oct. 29, 1929, and it was marked by a sharp fall in the stock market, with the Dow Jones Industrial Average (DJIA) especially hard hit in high trading volume. The DJIA fell 12 percent, one of the largest one-day drops in stock market history. More than 16 million shares were traded in the panic sell-off, which effectively ended the Roaring '20s and led the global economy into the Great Depression.

Black Tuesday signaled the end of a period of post-World War I economic expansion and the beginning of the Great Depression, which lasted until the beginning of World War II.

The United States emerged from World War I as a major economic power, but the country's focus was on developing its own industry rather than international cooperation. High tariffs were imposed on many imported products to protect nascent industries such as cars and steel. Agricultural prices fell as European production returned after being shut down during the war, and tariffs were imposed to try to protect American farmers as well. However, their incomes and the value of their farms fell, and migration to the industrialized cities accelerated.

The boom years of the so-called Roaring '20s were fueled by optimism that the world had fought the war to end all wars, and good times had arrived permanently. Between 1921 and the crash in 1929, stock prices went up nearly 10 times as ordinary individuals bought stock, often for the first time. This was fueled by lending by brokers that at times reached two-thirds of the stock price, with the purchased stock serving as collateral.

By the middle of 1929, the economy was showing signs of slowing, led by declines in purchases of houses and cars as consumers were burdened with debt. Steel production weakened. At the same time, news from Europe indicated an excellent harvest, which pushed commodity prices lower and rattled markets.

In August, the Federal Reserve Bank allowed its New York regional board to raise its discount rate, which caused central banks around the world to follow suit. The London stock market dropped sharply on Sept. 20 when top investor Clarence Hatry was jailed for fraud. Markets gyrated for the next month.

On Black Thursday, Oct. 24, the market fell 11 percent at the open. Heads of the major American banks devised a plan to support the market by buying large chunks of stock, and the market closed down just 6 points. But by Black Monday, the 28th, panic and margin calls spread. The market fell 13 percent and a further 12 percent on Black Tuesday in record-setting volume. Efforts led by the financiers and industrialists to support prices could not stem the tide of selling. The market lost $30 billion of value in those two days.

The market hit a 20th-century low of 41.22 on July 8, 1932, which was a fall of 89 percent from its high of 381.17 on Sept. 3, 1929. A new high wasn't reached until Nov. 23, 1954.