The Stock Market's Most Dramatic Drops

The stock market wobbles up and down on a near-daily basis, seemingly for no obvious reason to the average observer. But traders are often reacting to very real events, whether that's something like the housing market tanking or a vicious virus spreading. Fresh on the heels of the Dow Jones' biggest drop since 2020, here's a look at some of the most notable times stocks not only dipped, but seemingly dived off a cliff. 

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Also known as the Panic of 1907, the crisis played out over a three-week period in mid-October. The New York Stock Exchange fell almost 50% from its peak the previous year, and depositors made runs on banks and trust companies. While it began in New York, the panic spread nationwide as a number of banks and businesses declared bankruptcy. Problems began when a scheme to snap up a deciding share of United Copper Company’s stocks failed, causing the banks that funded the attempt to become insolvent. On the bright side, the ensuing chaos inspired the creation of the Federal Reserve, America’s central banking system, in 1913. 

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While most people think of the stock market crash of 1929 as the beginning of the Great Depression, it was a crash that came after a five-year boom, when the Dow Jones Industrial Average grew six times in value. But it all unraveled on Black Monday and Black Tuesday, Oct. 28-29, when the market began such a slide that it wouldn't bounce back to its pre-crash value until 1954. Most of the reason behind the crash, still the worst in U.S. history, had to do with rampant speculation in the stock market even as car sales, house sales, and steel production were slowing.

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This was a crash no one saw coming — but effects rippled all around the world. Twenty-three major world markets took a dip in October 1987; Hong Kong suffered the most with a drop of 45.8% and worldwide losses estimated to be $1.71 trillion. The crash came after the U.S. Department of Commerce announced high trade deficit numbers, which had a negative impact on the U.S. dollar and pushed up interest rates — and pushed down stock prices.

Ongoing speculation involving tech companies in the late ‘90s reached a peak in 2000 as the Internet grew — and grew, and grew. The Nasdaq rose a stunning 400% between 1995 and its March 2000 peak. When the bubble burst, it dropped a whopping 78%. During the crash, several online companies shut down, and those that survived, like Amazon, lost huge portions of their market capitalization.

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It all seemed like a dream come true for those looking to get into the housing market, but it certainly didn’t end that way. In 1999, the Federal National Mortgage Association (or Fannie Mae) began giving home loans to subprime borrowers, mostly people with low credit ratings who didn’t have the money to put down on a traditional loan. These loans allowed people who otherwise couldn’t afford a home an opportunity to buy one, but came loaded with high interest rates and balloon payments (large sums due after a lower-rate payment schedule expires). When debt forced many of these homeowners into foreclose bankruptcy, the ensuing financial collapse of the stock market would take four years to overcome — to say nothing of the challenge facing those subprime borrowers.

We’ve all heard that things can change in the blink of an eye, and the stock market is no exception. Also known as the crash of 2:45, the 2010 flash crash began at 2:32 p.m. on May 6 and lasted approximately 36 minutes. Stock indices including the Nasdaq, S&P 500, and Dow Jones Industrial Average collapsed —and then rebounded almost immediately. The Dow Jones  experienced its second-biggest intraday point decline up to that point, plummeting 998.5 points within minutes, although most of the loss was quickly recovered. There are plenty of theories as to what caused the flash crash — including a “fat finger theory” indicating that the drop could have been triggered by a large, accidental sell-off of Procter & Gamble stock — but the exact reason for the incident remains a mystery.

In early 2020, the whole world was rocked by COVID-19, and stocks couldn’t escape the clutches of the virus, either. Instability from the pandemic was mounting at the start of 2020, and by Feb. 20, stock markets around the globe suddenly crashed. The crash saw a handful of severe daily drops, with the biggest one, nicknamed “Black Monday II,” occurring on March 16 with a plunge of 12% to 13%. Banks tried to soothe widespread panic by cutting interest, cash flow, and bank rates. By April 7, the crash subsided.

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