What is '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.

BREAKING DOWN 'Black Tuesday'

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.

Run-Up to Black Tuesday

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.

The Crash

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.

RELATED TERMS
  1. Black Monday

    Black Monday, October 19, 1987, was a day when the Dow Jones ...
  2. Black Friday

    1. The day after Thanksgiving in the U.S., the kickoff of the ...
  3. Black

    The term 'black' is used to refer to a company's profitability. ...
  4. Black Thursday

    Black Thursday is the name for Thursday, Oct. 24, 1929, when ...
  5. Stock Market Crash

    A stock market crash is a rapid and often unanticipated drop ...
  6. War Risk

    War risk is the probability of loss of, or damage to, cargo, ...
Related Articles
  1. Trading

    The Crash Of 1929 - Could It Happen Again?

    Learn about the series of events that triggered the Great Depression.
  2. Insights

    A History Of Wall Street Profitability

    Learn about the performance of the Dow Jones Industrial Averages (DJIA) through the decades.
  3. Insights

    The Mechanics Of The Black Market

    Black markets will continue to exist as long as we have regulations and taxes. Discover how they work.
  4. Investing

    1987 Stock Crash, Can It Happen in 2017?

    The end of low interest rates and easy money could lead to a major market decline
  5. Trading

    Currency Trading On The Black Market

    The black market for currencies is increasingly becoming prevalent in nations marked by certain adverse economic factors such as high inflation rates and unrealistically high exchange rates.
  6. Investing

    Government Debt: From Billions To Trillions

    The national debt has been growing in leaps and bounds. Find out why.
  7. Financial Advisor

    4 Ways To Invest In Oil

    Many investors are looking for a way to invest in oil. Find out how you can buy into black gold.
  8. Insights

    Black Friday Sales Figures: Fact and Fiction

    Retailers are eager to cash in on the all-important holiday shopping season. But what exactly should investors make of the ensuing sales figures?
  9. Personal Finance

    9 Worst Items to Buy on Black Friday

    If these items are on your holiday shopping list, consider finding a substitute – or don't expect to get the deal of the year.
RELATED FAQS
  1. What caused Black Monday: The stock market crash of 1987?

    Find out about the factors behind the stock market crash of 1987, also known as Black Monday, when the Dow Jones Industrial ... Read Answer >>
  2. Where can I find all of the stocks in the Dow Jones Industrial Average?

    The Historical Components List is the best place to learn about all 30 stocks in the Dow Jones Industrial Average. Read Answer >>
  3. What causes a significant move in the stock market?

    There is a nearly infinite number of factors that can cause the stock market to move significantly in one direction or another. ... Read Answer >>
  4. How long has the U.S. run fiscal deficits?

    Read about the history of deficit spending in the United States, dating back to 1789, and learn about then-Treasury of the ... Read Answer >>
  5. How does the performance of the stock market affect individual businesses?

    Learn how stock markets affect individual businesses by influencing consumer spending levels and affecting the way companies ... Read Answer >>
Hot Definitions
  1. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  2. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  3. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  4. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  5. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  6. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
Trading Center