Black Tuesday — 90 Years Ago Today

October 29, 1929 was Black Tuesday on Wall Street. This was the day that really broke the market because it was supposed to be a rebound. The market had fallen sharply the day before, and the week before.

The Monday-Tuesday decline was over 25%. That’s larger than the one-day fall in 1987. It still ranks as the worst two-day plunge in market history.

Volume reached 16 million shares. Workers had to stay overtime to process the whole thing. The volume record would stand for the next 40 years.

Check out the coverage from the New York Times:

Stock Prices Slump $14,000,000,000 in Nation-Wide Stampede to Unload; Bankers to Support Market Today

By THE NEW YORK TIMES

The second hurricane of liquidation within four days hit the stock market yesterday. It came suddenly, and violently, after holders of stocks had been lulled into a sense of security by the rallies of Friday and Saturday. It was a country-wide collapse of open-market security values in which the declines established and the actual losses taken in dollars and cents were probably the most disastrous and far-reaching in the history of the Stock Exchange.

That the storm has now blown itself out, that there will be organized support to put an end to a reaction which has ripped billions of dollars from market values, appeared certain last night from statements by leading bankers.

Although total estimates of the losses on securities are difficult to make, because of the large number of them not listed on any exchange, it was calculated last night that the total shrinkage in American securities on all exchanges yesterday had aggregated some $14,000,000,000, with a decline of about $10,000,000,000 in New York Stock Exchange securities. The figure is necessarily a rough one, but nevertheless gives an idea of the dollars and cents recessions in one of the most extraordinary declines in the history of American markets.

It was not so much the little trader or speculator who was struck by yesterday’s cyclone; it was the rich men of the country, the institutions which have purchased common stocks, the investment trusts and investors of all kinds. The little speculators were mostly blown out of their accounts by the long decline from early September. Thousands of them went headlong out of the market on Thursday. It was the big man, however, whose holdings were endangered yesterday and who threw his holdings into the Stock Exchange for just what they would bring, when hysteria finally seized him.

Market Leaders Hard Hit

Shares of the best known American industrial and railroad corporations smashed through their old lows of Thursday, and most of them to the lowest level for many years, as wave after wave of liquidation swept the market during its day of utter confusion and rout. As bid after bid was filled for stocks and more and more offered, stocks of the best grade dropped almost perpendicularly, with 2, 3, 5 and even 10 points between sales under probably the most demoralized conditions of trading in the history of the Stock Exchange and the Curb.

United States Steel declined 17 1/2, General Electric lost 47 1/,; United States Industrial Alcohol, 39 1/2; Standard Gas, 40 1/2; Columbia Gas, 22; Air Reduction, 48 7/8; Allied Chemical & Dye, 36; Baltimore & Ohio, 13 3/8; A.M. Byers Company, 30 3/4; Chesapeake & Ohio, 23 1/2; New York Central, 22 5/8; Peoples Gas, 40 1/2; Westinghouse Electric, 34 1/4; Western Union, 39 1/2; and Worthington Pump, 29.

These are the blue chips of the market, seasoned stocks based on the country’s leading industries, and which have lead the way up the ladder of fluctuations over many months of the now thoroughly defunct bull market. They, and many others, are the issues in which speculation has been most rampant. But stocks of all kinds were affected by the market’s second debacle. The good went down with the bad and levels undreamed of in Wall Street a month or so ago were crashed through before the resistless assault of a headlong and in many cases senseless wave of liquidation.

Causes of Crash Varied

Yesterday’s far-reaching decline in stocks may be ascribed mainly to a general loss of confidence in the market and the inability of any man or group to stem such a torrent of selling, which came from all parts of the world. European selling forming a very material percentage of the stocks forced on the market. But there were thousands of ramifications to the market and many factors, too, which served to add their quota of pressure.

Among these may be enumerated: Belated liquidation from Thursday’s crash, when the market did not rally promptly from the decline.

The cleaning out of several stale pools, whose holdings, in some cases large, went into the market for what they would bring.

The immediate drying up of buying power on the part of the general public, already badly hit in the smash of Thursday.

Bear selling for the decline of an adroit and unspectacular fashion.

The mob psychology which impels holders of stocks in all parts of the country to try to sell them all at once when the market shows signs of giving way.

Margin calls which went out of Wall Street by the thousands and which mainly were answered by orders to sell at the market.

The catching of stop-loss orders, many of them put in months ago.

Day’s Sales 9,212,800 Shares

The statistical record of yesterday’s tremendous day furnished proof that in many respects it did not equal last Thursday’s trading, although the declines were larger. Trading on the Stock Exchange aggregated 9,212,800 shares, as compared with 12,894,650 on Thursday. On the Curb Market sales were 4,152,900 shares, as compared with 6,837,415 in last week’s violent decline.

Once again the lateness of the tickers added to the confusion and as a guide to the trading were well-nigh worthless. At ten-minute intervals the floor prices were flashed on the bond tickers; and the Dow, Jones news tickers and the New York News Bureau tickers furnished running flows of quotations as they were received from the floor of the Exchanges. It was only by these methods of expediency that Wall Street was able to keep up with the market at all, and in most brokerage houses all attempts to keep their quotation boards up to date were abandoned. It just could not be done.

Pool’s Purpose Misunderstood

One of the difficulties that beset the market was the popular misconception that the banking pool, organized by J. P. Morgan & Co., the First National Bank, the National City Bank, the Guaranty Trust Company, the Equitable Trust Company, and the Chase National Bank would throw funds into the market to save it. What the bankers had set out to do, with their consortium, was merely to supply bids where no bids existed and to plug up the “air hole” which the market had developed on Thursday. They had no idea of putting the market up, or saving any one’s profits. Rather the general plan was to provide a degree of stabilization on which further liquidation could take place, if it proved necessary.

The rally of Friday and the steadiness of the market, which returned to normal on Saturday, could be attributed partly to this misconception, partly to a temporary restoration of confidence by the public generally. The long Sunday holiday gave traders the opportunity to think over their own particular problems. Those who still had profits in the market could visualize them slipping away; those who had losses feared that they might be extended still further. There was that very large definite quota, too, who had received margin calls over the week’s end and who had decided to get out of the market completely.

Opening Weak and Nervous

At any rate, stocks opened weak, nervous and unsettled. Steel, at 202 1/4 was off 1 /1/4. International Telephone and Telegraph at 100 was off 3, General Electric at 290 was off 7 1/2, and there were similar reactions from Saturday’s closing figures.

The opening quotations were a surprise and a shock to Wall Street and to the country, which watched its tickers at 10 o’clock with feverish anxiety. It had been generally believed that some sort of organized support had been arranged over Sunday and that the market, at least, would be a steady one. Most persons believed that the storm of liquidation had blown itself out and that while the market might not advance, still it would not decline very far and that the orderly readjustments started on Friday and Saturday could be completed.

But these reckonings had been made without taking into consideration the deep-seated fear of a smashing and declining market by the thousands of holders of stocks at home and abroad. They had been through a tempestuous and nerve-wracking week and the answer to the opening quotations was a veritable flood of selling which swept the market from its feet.

Steel Leads in Decline

Steel pounded down through 200, and 5 to 10 point declines all over the list had been established by 10:30 o’ clock. By 11 o’ clock the market was in the identical state of demoralization that characterized it on Thursday when the bottom dropped out. Each set of figures brought news of a lower level of prices, and stocks were going down 5 to 10 points in an hour, with support evidently of a very chary character and without power to stem the torrent of liquidation which again was flowing over the country’s Exchanges.

From nervous irregularity at the opening, the tone became weak and it continued increasingly weak right through to the close, with nervousness and hysteria becoming more emphasized during the final hour of trading when almost 3,000,000 shares were dealt in on the Stock Exchange.

It was in this final hour that the greatest damage was done. Terror reigned on the Stock Exchange, on the Curb and in the brokerage offices. A curious hush fell over customers’ rooms in strange contrast to the pushing, whirling, shouting mob of brokers on the floor of the Exchanges who strove with might and main to execute their orders. Few men or women spoke. Most of them merely watched with fascinated eyes the jumping hieroglyphics. Most of them had been sold out. But they held to their chairs and watched the quotations as if hypnotized.

Rush of Sales Increases

The mounting volume and the declining quotations synchronized with each other during the entire day. Sales to 10:30 on the Stock Exchange were 815,600 shares; by 12 o’clock they had mounted to 3,135,200; by 1:30 to 5,547,900; by 2:10 to 6,328,500, with the total finally footing up to 9,212,800.

The statistical record of the day’s debacle, as measured by the averages compiled by The New York Times, which have been maintained since 1911, reflected the greatest decline in history, and the industrial averages and the combined, that is, twenty-five representative railroad and twenty-five representative industrial shares, sold down to new low points for the year. Little more than two months ago all of them established new highs. Figured by these measures, the rails declined 9.31, and the industrials 49.12, the combined dropping 29.22. The industrials reached a high of 469.49 on Sept. 19. Yesterday they dropped to 314.95, a decline of 154.54. The combined average of fifty stocks sold at their high for all time on Sept. 19 was 311.90. The decline since that date, to yesterday’s low of 222.57, has been 89.33 points.

Wild Rumors Current

One of the features of the day’s trading was the large number of rumors afloat. These involved houses as well as individuals, but none of them was believed to be true. Thus far, the financial district has got through the most disastrous break in its history in exceptionally good fashion. As on Thursday, there were many reports of suicides in Wall Street, none of which was true. There was no mistaking the gravity of the situation which has developed, however, or the attitude with which leading bankers and brokers view it.

There was but one brief respite during the day. At 1:10 P.M. the news tickers reported that Charles E. Mitchell had just entered the Morgan offices. Wall Street jumped to the conclusion that another banking conference was on, and stocks steadied momentarily. Steel common was then selling on the floor of the Exchange at 193 1/2. A Morgan broker on the floor of the Stock Exchange started bidding for Steel, and the market leader immediately rallied to 198. But the rally was short-lived. Ten minutes later Steel was back to 190 and stocks started once more on the violent smash that did not stop until the bell halted trading.

Posted by Eddy Elfenbein on October 29th, 2019 at 1:31 pm

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