Stock market downturn of 2002

Short description: Downturn in international stock prices

In 2001, stock prices took a sharp downturn (some say "stock market crash" or "the Internet bubble bursting") in stock markets across the United States , Canada , Asia, and Europe. After recovering from lows reached following the September 11 attacks, indices slid steadily starting in March 2002, with dramatic declines in July and September leading to lows last reached in 1997 and 1998. The United States dollar increased in value relative to the euro, reaching a 1-to-1 valuation not seen since the euro's introduction.

## Contents

* 1 Background
* 2 Seeking a bottom
* 3 Scale
* 4 Index levels
* 5 See also
* 6 References
* 7 External links

## Background

This downturn can be viewed as part of a larger bear market or correction that began in 2000 after a decade-long bull market had led to unusually high stock valuations, according to a report by the Cleveland Federal Reserve.[1] The collapse of Enron is a prime example. Many internet companies (Webvan, Exodus Communications, and Pets.com) went bankrupt. Others (Amazon.com, eBay, and Yahoo!) went down dramatically in value, but remain in business to this day and have generally good long-term growth prospects. An outbreak of accounting scandals, (Arthur Andersen, Adelphia, Enron, and WorldCom) was also a factor in the speed of the fall, as numerous large corporations were forced to restate earnings (or lack thereof) and investor confidence suffered. The September 11 attacks also contributed heavily to the stock market downturn, as investors became unsure about the prospect of terrorism affecting the United States economy.

The International Monetary Fund had expressed concern about instability in United States stock markets in the months leading up to the sharp downturn. The technology-heavy NASDAQ stock market peaked on March 10, 2000, hitting an intra-day high of 5,132.52 and closing at 5,048.62. The Dow Jones Industrial Average, a price-weighted average (adjusted for splits and dividends) of 30 large companies on the New York Stock Exchange, peaked on January 14, 2000, with an intra-day high of 11,750.28 and a closing price of 11,722.98. In 2001, the DJIA was largely unchanged overall but had reached a secondary peak of 11,337.92 (11,350.05 intra-day) on May 21.

The downturn may be viewed as a reversion to average stock market performance in a longer-term context. From 1987 to 1995, the Dow rose each year by about 10%, but from 1995 to 2000, the Dow rose 15% a year. While the bear market began in 2000, by July and August 2002, the index had only dropped to the same level it would have achieved if the 10% annual growth rate followed during 1987–1995 had continued up to 2002.

## Seeking a bottom

After falling for 11 of 12 consecutive days closing below Dow 8000 on July 23, 2002, the market rallied. The Dow rose 13% over the next four trading days, but then fell sharply again in early August. On August 5, the NASDAQ fell below its July 23 low. However, the markets rose sharply over the rest of the week, and eventually surpassed Dow 9000 during several trading sessions in late August. After that, the Dow dropped to a four-year low on September 24, 2002, while the NASDAQ reached a 6-year low. The markets continued their declines, breaking the September low to five-year lows on October 7 and reaching a bottom (below Dow 7200 and just above 1100 on the NASDAQ) on October 9. Stocks recovered slightly from their October lows to year-end, with the Dow remaining in the mid-8000s from November 2002 to mid-January 2003. The markets reached a final low below Dow 7500 in mid-March 2003.

## Scale

As of September 24, 2002, the Dow Jones Industrial Average had lost 27% of the value it held on January 1, 2001: a total loss of 5 trillion dollars. The Dow Jones had already lost 9% of its peak value at the start of 2001, while the Nasdaq had lost 44%. At the March 2000 top, the sum in valuation of all NYSE-listed companies stood at $12.9 trillion, and the valuation sum of all NASDAQ-listed companies stood at $5.4 trillion, for a total market value of $18.3 trillion. The NASDAQ subsequently lost nearly 80% and the S&P 500 lost 50% to reach the October 2002 lows. The total market value of NYSE (7.2) and NASDAQ (1.8) companies at that time was only $9 trillion, for an overall market loss of $9.3 trillion.

## Index levels

To put the downturn of 2002 in perspective, here is a look at annual U.S. stock market declines in 2000, 2001, and 2002:

* Nasdaq
* In 2000, the Nasdaq lost 39.28% of its value (4,069.31 to 2,470.52).
* In 2001, the Nasdaq lost 21.05% of its value (2,470.52 to 1,950.40).
* In 2002, the Nasdaq lost 31.53% of its value (1,950.40 to 1,335.51).
* Dow Jones Industrial Average
* In 2000, the Dow lost 6.17% of its value (11,497.10 to 10,788.00)
* In 2001, the Dow lost 5.35% of its value (10,788.00 to 10,021.60)
* In 2002, the Dow lost 16.76% of its value (10,021.60 to 8,341.63)

Here is a historical view of the stock market downturn of 2002 including figures from the stock market bubble of the late 1990s:

Date | Nasdaq | % Chng.§ | Dow Jones | % Chng.§ | Notes

|
|
|
|
|

January 1, 1997 | 1,291.03 | — | 6,448.30 | —
January 1, 1998 | 1,570.35 | +21.63% | 7,908.30 | +22.64%
January 1, 1999 | 2,192.69 | +39.63% | 9,181.40 | +16.10%
January 1, 2000 | 4,069.31 | +85.58% | 11,497.10 | +25.22%
January 14, 2000 | 4,064.27 | −0.12% | 11,722.98 | +1.97% | The day the DJIA peaked.
March 10, 2000 | 5,048.62 | +24.22% | 9,928.80 | −15.31% | The day the Nasdaq peaked.
January 1, 2001 | 2,470.52 | −51.07% | 10,788.00 | +8.65%
January 20, 2001 | 2,770.38 | +12.14% | 10,587.60 | −1.86% | President Bush takes office.
September 10, 2001 | 1,695.38 | −38.80% | 9,605.51 | −9.28% | Levels before September 11, 2001 attacks.
September 21, 2001 | 1,423.19 | −16.05% | 8,235.81 | −14.26% | Lows after markets reopened.
January 1, 2002 | 1,950.40 | +37.04% | 10,021.60 | +21.68%
October 9, 2002 | 1,114.11 | −42.88% | 7,286.27 | −27.29% | 2002 lows.
January 1, 2003 | 1,335.51 | +19.87% | 8,341.63 | +14.48%
January 1, 2004 | 2,003.37 | +50.01% | 10,453.92 | +25.32%

§Values represent percent change from previous date listed in table.

## See also

* Economy of the United States

## References

1. ↑ "A Retrospective on the Stock Market in 2000" (PDF). http://www.clevelandfed.org/research/commentary/2001/0115.pdf.

## External links

NB: Registration required for all links

* "Rally Sends Major Gauges to Gains of More Than 5%", The New York Times, July 30, 2002
* "NEWS ANALYSIS: What Will Halt the Skid on Wall Street?", The New York Times, July 22, 2002
* "The Confidence Crisis", The New York Times, July 21, 2002
* "Stocks Continue Four-Month Rout; Dow Plunges 390", The New York Times, July 20, 2002
* "MARKET PLACE: Adding to Loss of Investments, a Loss of Faith in the Market", The New York Times, July 20, 2002
* "SCREAM! Hold On for a Wild Ride", The New York Times, July 21, 2002
* "S.&P. 500 Index Drops to Its Lowest Level Since 1997", Bloomberg News, July 19, 2002

* v
* t
* e

Financial crises

* Banking panic
* Bear market
* Credit crunch
* Credit cycle
* Currency crisis
* Debt crisis
* Energy crisis
* Flash crash
* Hyperinflation
* Liquidity crisis
* Minsky moment
* Stock market crash

Pre–1000|

* Crisis of the Third Century (CE 235–284)

1000–1760|

* Great Bullion Famine (c. 1400–c. 1500)
* The Great Debasement (1544–1551)
* Kipper und Wipper (1621–1623)
* Tulip mania crash (1637)
* South Sea bubble crash (1720)
* Mississippi bubble crash (1720–1721)

1760–1840|

* Amsterdam banking crisis of 1763
* Bengal bubble crash (1769–1784)
* Crisis of 1772
* Dutch Republic financial collapse (c. 1780–1795)
* Panic of 1785
* Copper Panic of 1789
* Panic of 1792
* Panic of 1796–97
* Danish state bankruptcy of 1813
* Panic of 1819
* Panic of 1825
* Panic of 1837

1840–1870|

* Panic of 1847
* Panic of 1857
* Panic of 1866
* Black Friday (1869)

1870–1914|

* Panic of 1873
* Paris Bourse crash of 1882
* Panic of 1884
* Arendal crash (1886)
* Baring crisis (1890)
* Encilhamento (1890–1893)
* Panic of 1893
* Australian banking crisis of 1893
* Black Monday (1894)
* Panic of 1896
* Panic of 1901
* Panic of 1907
* Shanghai rubber stock market crisis (1910)
* Panic of 1910–11

1918–1939|

* Early Soviet hyperinflation (1917–1924)
* Weimar Republic hyperinflation (1921–1923)
* Shōwa financial crisis (1927)
* Wall Street Crash of 1929
* Panic of 1930

1945–1973|

* Kennedy Slide of 1962

1973–1982|

* 1970s energy crisis (1973–1980)
* 1973 oil crisis
* 1973–74 stock market crash
* Secondary banking crisis of 1973–1975
* Latin American debt crisis (1975–1982)
* 1976 IMF crisis
* 1979 oil crisis
* Brazilian hyperinflation (1980–1982)

1982–2007|

* Brazilian hyperinflation (1982–1994)
* Souk Al-Manakh stock market crash (1982)
* Chilean crisis of 1982
* 1983 Israel bank stock crisis
* Black Saturday (1983)
* Savings and loan crisis (1986–1995)
* Black Monday (1987)
* 1988–1992 Norwegian banking crisis
* Friday the 13th mini-crash (1989)
* Japanese asset price bubble crash (1990–1992)
* 1990 oil price shock
* Rhode Island banking crisis (1990–1992)
* 1991 Indian economic crisis
* 1990s Swedish banking crisis (1991–1992)
* 1990s Finnish banking crisis (1991–1993)
* 1990s Armenian energy crisis (1991–1995)
* Cuban Special Period (1991–2000)
* Black Wednesday (1992)
* 1992 Colombian energy crisis
* 1994 bond market crisis
* Venezuelan banking crisis of 1994
* Mexican peso crisis (1994)
* 1997 Asian financial crisis
* October 27, 1997 mini-crash
* 1998 Russian financial crisis
* 1998–99 Ecuador financial crisis
* Samba effect (1999)
* California electricity crisis (2000–01)
* Dot-com bubble crash (2000–2004)
* 2001 Turkish economic crisis
* 9/11 stock market crash (2001)
* Stock market downturn of 2002
* South American economic crisis of 2002
* 2002 Uruguay banking crisis
* 2003 Myanmar banking crisis
* 2000s energy crisis (2003–2008)
* 2004 Argentine energy crisis
* Nigerian energy supply crisis (2005–)
* 2007 Chinese stock bubble crash
* Zimbabwean hyperinflation (2007–)

2007–08|

* U.S. housing market correction (2006–07)
* 2008 Bulgarian energy crisis
* 2008 Central Asia energy crisis
* 2008 Latvian financial crisis
* 2008–09 Belgian financial crisis
* 2008–09 Russian financial crisis
* 2008–09 Ukrainian financial crisis
* 2008–2011 Icelandic financial crisis
* 2008–2011 Irish banking crisis
* 2008–2014 Spanish financial crisis
* European debt crisis
* Greek government-debt crisis
* Subprime mortgage crisis
* U.S. bear market of 2007–2009

Post–2008|

* 2009 Ecuador electricity crisis
* 2009 Dubai debt standstill
* Venezuelan banking crisis of 2009–10
* 2010 Flash Crash
* 2010–2014 Portuguese financial crisis
* Energy crisis in Venezuela (2010–)
* 2011 Tōhoku earthquake and tsunami stock market crash
* August 2011 stock markets fall
* 2011 Bangladesh share market scam
* 2012–13 Cypriot financial crisis
* 2013 Chinese banking liquidity crisis
* Venezuela economic crisis (2013–)
* Gaza electricity crisis (2013–)
* 2014–2016 Brazilian economic crisis
* Puerto Rican government-debt crisis (2014–)
* 2014–2017 Russian financial crisis
* 2015–16 Chinese stock market turbulence
* 2015–16 stock market selloff
* Zulia energy collapse (2015–)
* Brexit stock market crash (2016)
* 2016 Southeastern U.S. gas shortage
* Venezuelan hyperinflation (2016–)
* 2017 Sri Lankan fuel crisis
* Ghana banking crisis (2017–18)
* 2018 cryptocurrency crash
* 2018 Turkish currency and debt crisis

* List of banking crises
* List of economic crises
* List of sovereign debt crises
* List of stock market crashes and bear markets

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