What Was Black Thursday?
Black Thursday is the name given to Thursday, October 24, 1929, when panicked investors sent the Dow Jones Industrial Average plunging 11% at the open in very heavy volume. Black Thursday began the Wall Street crash of 1929, which lasted until October 29, 1929.
Black Thursday may also refer to early holiday shopping occurring Thursday evening following Thanksgiving dinner, and preceding "Black Friday" shopping.
- Black Thursday can refer to two dates but is more commonly used to describe the day the DOW plummeted in 1929, causing the Great Depression.
- The day caused such a domino effect of selling that the index fell nearly 90%, and wasn't able to recover for almost 25 years.
- Black Thursday was the day where the DOW dropped, but in reality, it was the inciting event, triggering a painful sell-off that lasted years, bankrupting investors across all levels of wealth.
Understanding Black Thursday
Black Thursday and the consequent market crash of 1929 triggered a complete overhaul of market regulation of the U.S. securities industry. These events led to the promulgation of the Securities Act of 1933 and the Securities Exchange Act of 1934. Many investors had borrowed or leveraged heavily to buy stocks, and the crash on Black Thursday wiped them out financially—leading to widespread bank failures. Black Thursday was the catalyst that eventually sent the U.S. economy into an economic upheaval called the Great Depression of the 1930s.
Even before the New York Stock Exchange opened on that fateful Thursday in 1929, investors were already panicking. The Dow Jones Industrial Average had fallen 4.6% the day before. The Washington Post headline exclaimed, "Huge Selling Wave Creates Near-Panic as Stocks Collapse." When the market opened on Black Thursday at 305.85, it immediately fell 11% during intra-day trading.
The stock market had already fallen off nearly 20% since its record close (at the time) of 381.2 on September 3, 1929. Even worse, trading volume was 12.9 million shares—three times normal volume. The three leading banks at that time were Morgan Bank, Chase National Bank, and National City Bank of New York. They bought stocks to attempt to restore confidence in the markets. The Dow recovered a bit, closing 2% down, at 299.47. On Friday, the Dow closed higher, at 301.22.
However, on Black Monday, it fell in light trading, to 260.64, which triggered an all-out panic on Black Tuesday. By the end of the day, the Dow had fallen to 230.07, another 12% loss.
After the crash, the Dow continued sliding for three more years, bottoming out on July 8, 1932, at 41.22. The Dow lost almost 90% of its value since its high on September 3, 1929. In fact, it didn't reach that high again for 25 years, until November 23, 1954.
Although Black Thursday preceded it, the stock market crash of 1929 was actually caused by several factors. These include an excess production in several industries, an oversupply in multiple areas of the market, faltering share prices, numerous shares having been bought on margin, and a lack of cash on the sidelines.
Black Thursday officially ended as one of the most prosperous bull markets and changed the then-held positive perception that bullish markets meant a strong U.S. economy.
Special Consideration: Black Thursday Shopping
In recent years, "Black Thursday" has had a positive connotation to it since it's often used to describe the Thanksgiving holiday in the United States. More retailers are open on Thanksgiving evening in a bid to get an early start on the frenzied shopping of Black Friday. The term "black" in the case of Black Friday refers to the black ink that was traditionally used to record a profit by accountants while red ink was used to record losses.
The shopping version of "Black Thursday" has led to growing resistance among employees of retailers, who complain that they are forced to leave Thanksgiving family dinners early in order to report to work on time. Many retailers are opening earlier on Black Thursday with every passing year in order to counter the increasing popularity of online sales.