The Biggest One-Day Declines in the Dow Jones Industrial Average

Economic and political turmoil often result in wild swings of stock prices

by Beth Rowen
Dow

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Investors large and small carefully monitor the stock market to keep track of their assets. Just about every news report includes a summary of the stock market’s daily action. Stock prices are often dependent on the economy and political climate. Indeed, the market serves as a barometer of not only the economic state of affairs, but also of political stability. It can be wildly unpredictable and sensitive—a far-flung election can send prices into a freefall or a rosy financial report from one sector of the government can send prices soaring. The ebb and flow of the market can cause great stress and impulsive action.

The Dow Jones Industrial Average (DJIA) reports the average stock price of 30 large, publicly traded U.S. companies. It tends to reflect the state of the stock market as a whole. Though its name would lead you to believe the DJIA is made up of only industrial companies, the DJIA in fact contains stocks across many “industries,” not all of which are industrial. The businesses represented include financial, food, technology, retail, heavy equipment, oil, chemical, pharmaceutical, consumer goods, and entertainment.

History of the Dow Jones Average

Charles Dow (1851–1902) and Edward Davis Jones (1856–1920) created the Dow Jones index in 1884. The first average consisted mainly of railroad stocks. The industrial average debuted in 1896 with 12 stocks, representing many industries, and railroad stocks became a separate average. Later in 1896, the Wall Street Journal began publishing the daily average. The industrial average expanded from 12 to 20 stocks in 1916, and to 30 in 1928.

Here’s a look at the biggest declines in the DJIA, based on the number of points the average fell. Many of the biggest drops occurred during the 2008 U.S. financial crisis.

Date Drop in points (percent in parentheses) Closing price Circumstances
1. Sept. 29, 2008 777.68 (-6.98%) 10,365.45 The financial crisis in the U.S. deepened when the House of Representatives rejected a $700 billion bailout package.
2. Oct. 15, 2008 733.08 (-7.87%) 8,577.91 The Dow Jones dropped in response to a report that retail sales have reached a 3-year low and a speech by Federal Reserve Chairman Ben Bernanke in which he says the economic recovery will be slow.
3. Sept. 17, 2001 684.81 (-7.13%) 8,920.70 The market plunged on the first day of trading after the Sep. 11 terrorist attacks against the U.S.
4. Dec. 1, 2008 679.95 (-7.7%) 8,149.09 The Dow sunk amid confirmation by the National Bureau of Economic Research that the U.S has been in recession since Dec. 2007 and a report that U.S. manufacturing hit a 26-year low.
5. Oct. 9, 2008 678.91 (-7.33%) 8,579.19 In the most active day in New York Stock Exchange history, investors sell off stocks in a panic, and the Dow closes below 9,000 for the first time in five years.
6. Aug. 8, 2011 634.76 (-5.55%) 10,809.85 The Dow dropped in reaction to Standard and Poor's downgrading of the U.S. credit rating from AAA to AA-plus.
7. April 14, 2000 617.77 (-5.66%) 10,305.78 The Dow dropped in reaction to a government report that said consumer prices were stronger than expected, which triggered fears of inflation.
8. Oct. 27, 1997 554.26 (-7.18%) 7,161.14 The Dow fell after an overnight crash of the Asian markets that started in Hong Kong. Prices dropped so quickly and radically that trading was halted twice during the day, and the market was shut down early.
9. Aug. 10, 2011 519.83 (-4.62%) 10719.94 The Dow dropped still reacting to the Standard and Poor's downgrading of the U.S. credit rating from AAA to AA-plus.
10. Oct. 22, 2008 514.45 (-5.69%) 8,519.21 The Dow reacted to weak third-quarter earnings reports from several companies that spark further fears of a recession.
11. Aug. 4, 2011 512.76 (-4.31%) 11,383.68 The Dow plunged as investors remained on edge about the global economy.
12. Aug. 31, 1998 512.62 (-6.37%) 7,539.06 The Dow sunk in reaction to political uncertainty in Russia that left the Russian economy on the brink of collapse.
13. Oct. 7, 2008 508.39 (-5.11%) 9,447.11 The Dow continued its precipitous fall as the 2008 financial crisis showed no signs of letting up, despite the passage of a $700 billion bailout package by the U.S. government.
14. Oct. 19, 1987 508.00 (-22.61%) 1,738.74 The Dow dipped drastically on “Black Monday,” following a meltdown in Asian markets that spread to Europe and the U.S.
15. Sept. 15, 2008 504.48 (-4.42%) 10,917.51 Fear overtook the market the day after Lehman Brothers filed for bankruptcy, the largest in U.S. history. It was the worst one-day loss since the September 11, 2001, terrorist attacks.
16. Nov. 5, 2008 486.01 (-5.05%) 9,139.27 A day after Sen. Barack Obama won presidential election, the Dow dropped. Economists attribute the decline to the dismal economy Obama will inherit.
17. Sept. 17, 2008 449.36 (-4.06%) 10,609.66 This decline came the day after the Federal Reserve agreed to a $85 billion package to rescue the insurance giant American International Group.
18. Sept. 20, 2008 444.99 (-5.56%) 7552.29 The Dow Jones continued to struggle in light of the country's recession.
19. Sept. 6, 2008 443.48 (-4.85%) 8695.79 The Dow Jones continued to drop in response to panic and anxiety over the recession.
20. March 12, 2001 436.37 (-4.10%) 10,208.25 This decline came from a faltering economy and blue-chip companies like J.P. Morgan and Pfizer as well as tech stocks posting sub-par results.

More from Stock Market

Information Please® Database, © 2007 Pearson Education, Inc. All rights reserved.

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