Black Thursday 1929: What Happened and What Caused It

The First Day of the Worst Stock Market Crash in U.S. History

Black Thursday news coverage
Top half of the front page of the newspaper Brooklyn Daily Eagle has banner headline reading 'Wall St. In Panic As Stocks Crash' which describes the massive fall in stock value on what became known as Black Thursday, October 24, 1929. Photo: Icon Communications / Getty Images

Black Thursday is October 24, 1929, the first day of the stock market crash of 1929. That was the worst stock market crash in U.S. history, kicking off the Great Depression

What Happened

Even before the New York Stock Exchange opened, investors were panicky. The Dow Jones Industrial Average had fallen 4.6 percent the day before. The Washington Post headline screamed, "Huge Selling Wave Creates Near-Panic as Stocks Collapse." The market opened at 305.85.

It immediately fell 11 percent during intra-day trading. That's slightly more than a stock market correction

That worried Wall Street bankers. The stock market had already fallen nearly 20 percent since its record close of 381.2 on September 3, 1929. Even worse, trading volume was 12.9 million shares, or three times the normal amount. The three leading banks at that time were Morgan Bank, Chase National Bank, and National City Bank of New York. They bought stocks just to restore confidence in the markets. The intervention seemed to work. The Dow recovered a bit, closing just 2 percent down, at 299.47. (Source: "1929 Crash," San Francisco University.)

On Friday, the Dow closed higher, at 301.22. But on Black Monday, it fell in light trading, to 260.64. That triggered an all-out panic on Black Tuesday. By the end of the day, the Dow had fallen to 230.07, a 12 percent loss.

After the crash, the Dow continued sliding for three more years.

It finally bottomed on July 8, 1932, closing at 41.22. All told, it lost nearly 90 percent 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. Losses from the stock market crash helped create the Great Depression.  

What Caused It?

During the Roaring 20s, investing in the stock market became a national pastime.

From 1922 until right before the crash, the stock market value increased by 218 percent, or almost 20 percent a year.

Those who didn't have the cash to invest could borrow from their stockbroker "on margin." That meant they only had to put 10-20 percent down. The stories of everyone from maids to teachers making millions fueled irrational exuberance.

Some banks even invested their depositors' savings without telling them. Their misuse of funds created the run on the banks that was a hallmark of the Great Depression. Banks didn't have enough to honor depositors' withdrawals. Many people only got ten cents for every dollar. That was one reason President Roosevelt created the Federal Deposit Insurance Corporation  as part of the New Deal.

There were some warning signals in the spring of 1929. The Dow dropped in March, but bankers reassured investors and restored confidence. Next, on August 8, the Federal Reserve Bank of New York increased the discount rate from 5 to 6 percent. The Bank of England followed on September 26 to slow a loss of its gold reserves as a result of Wall Street investments. Like all other developed countries, England was on the gold standard. That meant it and had to honor any payments, if asked, with its value in gold.

As interest rates rose, financing for stockbroker margin loans fell.

On September 29, newspapers reported how Clarence Hatry's use of fraudulent collateral to buy United Steel. His company collapsed, and investors lost billions. That hammered the British stock market, making U.S. investors even more jittery.

The next precipitating factor occurred on October 3, 1929. England's Chancellor of the Exchequer called America's stock market "a perfect orgy of speculation." On October 4, the Wall Street Journal and the New York Times agreed in editorials. U.S. Treasury Secretary of the Treasury Andrew Mellon said investors "acted as if the price of securities would infinitely advance."

Media coverage of significant stock market declines on October 3, 4 and 16 added to the market's instability. On October 19 and 20, the Washington Post focused on a sell-off of utility stocks.

On Monday, October 21, the market went down again.

On October 22, The New York Times blamed stock speculators for the previous day's losses.  They named margin sellers, short-selling, and the disappearance of foreign investors. The next day, the market fell again.The next day, the market fell again. The Times headlines screamed "Prices of Stocks Crash in Heavy Liquidation." The press helped set the stage for Black Thursday. (Source: Harold Bierman, Jr, The 1929 Stock Market Crash.)

Black Thursday and the 1929 Stock Market Crash

DayDateOpen Close Percent Change  Number of Shares
Black ThursdayOct 24305.85299.47 -2%12,894,650 
FridayOct 25299.47301.22  1%  6,000,000
SaturdayOct 26301.22298.97 -1% 
Black Monday Oct 28298.97 260.64 -13%  9,250,000
Black Tuesday Oct 29 260.64230.07-12% 16,410,000