The Stock Market Crash of 1929: Black Tuesday in American History

A stock market is a gathering of stock buyers and sellers (also known as shares), which are ownership claims on businesses. In a nutshell, it is a group of markets and exchanges where regular activities such as buying, selling, and issuing shares of publicly traded companies take place. Such financial activities are carried out through institutionalized formal exchanges or over-the-counter (OTC) marketplaces that follow a set of rules. A country or region may have multiple stock trading venues that allow transactions in stocks and other forms of securities. 

Stock Market Crash

A stock market crash is an impetuous and unexpected drop in stock prices. A stock market crash can happen as a consequence of a major catastrophic event, an economic catastrophe, or the bursting of a long-term speculative bubble. The 1929 Great Depression, Black Monday in 1987, the 2001 dot-com bubble burst, the 2008 financial crisis, and the 2020 COVID-19 pandemic are all examples of famous stock market crashes. In this article, we will learn about the wall street crash of 1929.

What is Wall Street Crash?

On October 29, 1929, Wall Street experienced Black Tuesday, when investors traded 16 million shares on the New York Stock Exchange and that too in a single day. Thousands of investors were wiped out as billions of dollars were lost. Following Black Tuesday, America and the rest of the industrialized world plunged into the Great Depression (1929-39), the longest-lasting and deepest economic downturn in Western industrialized history up to that point.

The stock market in the United States grew rapidly from the mid-to-late-twenties. It lasted throughout the first six months after President Herbert Hoover's January 1929 inauguration. During the great "Hoover bull market," stock values climbed to incredible heights, and the general people, from bankers and industrialists to stewards and cooks, hurried to brokers to invest their liquid assets or savings in securities that they might sell at a profit. Banks pumped billions of dollars into Wall Street for broker loans to fund margin accounts. 

People sold their Liberty Bonds and took out mortgages to invest in the stock market. Around 300 million shares of the stock were carried on margin in mid-summer 1929, propelling the Dow Jones Industrial Average to a top of 381 points in September. Any warnings about the financial house of cards' shaky underpinnings went unheeded.

In September and early October, prices began to fall, However, speculation continued, fanned in many cases by those who had taken out loans to buy stock —a practice that could only be perpetuated as long as stock prices rose. On October 18, the stock market plummeted, and the frantic rush to buy equities gave way to an equally frantic rush to sell. On October 24, the first day of real panic, known as Black Thursday, a record 12.9 million shares were traded as investors scrambled to recoup their losses. Despite this, the Dow only fell six points as a number of prominent banks and financial firms purchased large blocks of stock in a successful attempt to calm the market that day.

On Black Monday (October 28), the market plunged 12.8%, reigniting fear. On Black Tuesday (October 29), about 16 million shares were traded. The Dow dropped another 12% to 198 points, a decrease of 183 points in less than two months. The value of prime securities plummeted, just like the stock of phony gold miners. On September 3, General Electric slipped from 396 to 210. On October 29, it fell to 210. The American Telephone and Telegraph Company's shares fell by 100 points. DuPont fell from a summer high of 217 to 80, United States Steel from 261 to 166, Delaware and Hudson from 224 to 141, and RCA common stock from 505 to 26.

Reason for Stock Market Crash

The "Roaring Twenties," as the decade was known, was a time of exuberant economic and social progress in the United States. The era came to an end in a dramatic and sudden manner in October 1929, when the stock market fell, ushering in America's Great Depression of the 1930s. Economic turmoil continued in the years after, with the US economy contracting by more than 36% from 1929 to 1933, as measured by Gross Domestic Product (GDP). 

Many American banks collapsed, causing consumers to lose their funds, while the unemployment rate soared to almost 25% as workers lost their jobs. Low wages, debt multiplication, a faltering agricultural sector, and an excess of huge bank loans that could not be liquidated were among the other major factors of the stock market crash of 1929.

The Repercussion of the US Stock Market Crash

After October 29, 1929, stock prices had nowhere to go but up, resulting in a substantial comeback in the weeks that followed. Prices continued to decline as the United States entered the Great Depression, and by 1932, stocks were only worth around 20% of what they were in the summer of 1929. Although the stock market fall of 1929 did not cause the Great Depression, it did, without a doubt, hasten the global economic collapse of which was a symptom. Nearly half of America's banks had failed by 1933, and unemployment had risen to 15 million people or 30% of the workforce.

Because they were the "last employed, first dismissed," African Americans were particularly heavily struck. Women fared marginally better during the Great Depression, as traditionally female jobs such as teaching and nursing were more insulated from market fluctuations than those dependent on them. During the Great Depression, life was terrible for the typical household. Storms and a severe drought wreaked havoc on crops in the Southern Plains, earning the region the moniker "dust bowl." Fleeing citizens were dubbed "Oakies" and went to big cities in search of work.

Conclusion

The stock market crash of 1929 and the Great Depression that followed (1929-1939) had a profound impact on practically every aspect of society, transforming an entire generation's perception of and connection with financial markets. In some ways, the period following the market crash was a complete reversal of the Roaring Twenties' mindset, which had been marked by enormous optimism, strong consumer spending, and economic expansion.