What Is Black Tuesday? Definition, History, and Impact

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%, 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 Twenties and led the global economy into the Great Depression.

Key Takeaways

  • Black Tuesday refers to a precipitous drop in the value of the Dow Jones Industrial Average (DJIA) on Oct 29, 1929.
  • Black Tuesday marked the beginning of the Great Depression, which lasted until the beginning of World War II.
  • Causes of Black Tuesday included too much debt used to buy stocks, global protectionist policies, and slowing economic growth.
  • Black Tuesday had far-reaching consequences on America's economic system and trade policy.

Understanding 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.

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 Twenties 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. Income inequality also rose. It is estimated that the top 1% of America's population held 19.6% of its wealth.

The 1929 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.


A few years earlier, European production of agricultural goods began to recover following World War I, which meant American farmers would lose that market to sell their goods. As a result, the U.S. Congress passed a series of bills designed to help American farmers by increasing tariffs (or prices) on imports, including agricultural products. At the same time, news from Europe indicated an excellent harvest, which meant an increased supply and overproduction, pushing commodity prices lower and rattling the markets.

The U.S. Congress stepped in again and passed the Smoot-Hawley tariff act, which not only increased tariffs on agricultural goods but on goods in other sectors as well. Many other countries had also adopted protectionist policies. The impact on global trade was devastating. International trade had decreased by 66% from 1929 to 1934.

The Fed

In August, the Federal Reserve Bank allowed its New York regional board to raise its discount rate. The monetary policy move 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.

The Crash

All of these factors eventually caused the stock market to crash. On Black Thursday, Oct. 24, the market fell 11% 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% and a further 12% 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% from its high of 381.17 on Sept. 3, 1929. Economic growth, as measured by Gross Domestic Product (GDP), shrank by more than 36% from 1929 to 1933. The unemployment rate in the United States surged to over 25% as workers were laid off after they had been hired during the boom years.

It was only after President Franklin Delano Roosevelt was elected that the economy showed signs of taking a turn towards the better. Among his achievements is stopping the Smoot-Hawley tariffs and establishing the Reciprocal Trade Agreement Act in 1934. Still, a new high wasn't reached until Nov. 23, 1954.

Article Sources
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  2. The Quarterly Journal of Economics. "Income Inequality in the United States, 1913-1998," Page 8. Accessed Jan. 8, 2021.

  3. History.state.gov. "Office of the Historian, Protectionism in the Interwar Period." Accessed Jan. 09, 2021.

  4. Federal Reserve History. "Stock Market Crash of 1929." Accessed Jan. 09, 2021.

  5. National Archives. "Four Score and Seven Years Ago." Accessed Jan. 8, 2021.

  6. St. Louis Fed. "Lessons Learned? Comparing the Federal Reserve’s Responses to the Crises of 1929-1933 and 2007-2009," Page 2. Accessed Jan. 09, 2021.