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> Stock market downturn of 2002
The stock market downturn of 2002 (some say "stock
market crash") is the sharp drop in stock prices during 2002 in
stock exchanges across the United States and Europe. After recovering
from lows reached following the September 11, 2001 Terrorist Attack,
indices slid steadily starting in March 2002, with dramatic declines
in July and September leading to lows last reached in 1997 and 1998.
declined steadily against the euro,
reaching a 1-to-1 valuation not seen since the euro's introduction.
This downturn can be viewed as part of a larger bear market or
correction, after a decade-long bull market had led to unusually
high stock valuations. An outbreak of accounting scandals was a
contributing factor to the speed of the fall, as numerous large
corporations were forced to restate earnings and investor confidence
The International Monetary Fund has expressed concern about instability
in United States stock markets.
The Nasdaq stock market peaked in March 2000, closing with over
5,000 for just two days March 9 and 10. Its peak was at 5,048.62
at the close of trading on March 10, 2000. The Dow Jones Industrial
Average, an average of 30 large companies on the New York Stock
Exchange, peaked in January 2000. Its peak was at 11,723.00 on January
From 1987 to 1995, the Dow Jones Industrial Average rose each
year by about 10%. From 1995 to 2000, the Dow rose 15% a year. A
bear market began in 2000; by July/August 2002, the Dow dropped
to the same level it would have been if the 10% annual growth rate
it followed during 1987-1995 had continued up to 2002.
After falling for 11 days and reaching a low below Dow 8000 on
July 23, 2002, the market rallied, rising 15% over the next four
trading days rising to over Dow 9000 during August. Indices fell
sharply again on August 2 and 3. On August 5, stocks continued their
decline, Nasdaq breaking the July 23 low. The markets rose sharply
over the rest of the week.
Beset by war jitters and dismal earning reports from key technological
sector stocks, dropped to a four-year low on September 24, 2002.
Stocks on the Nasdaq reached a 6-year low. As of September 24 the
Dow Jones Industrial Average had lost 27% of the value it had at
the inauguration of George W. Bush, a total loss of 5 trillion dollars.
The markets continued their declines, breaking the September low
to five-year lows on October 6. It should be noted that the Dow
Jones had already lost 9% of its value from its peak when Bush took
office, and the Nasdaq had lost 44% of its value from its peak before
Bush took office.
Stocks recovered slightly from their October lows, with the Dow remaining in the mid-8000s from November 2002 to mid-January 2003.
To put the downturn of 2002 in perspective, here is a look at
U.S. stock market declines in 2000, 2001, and 2002:
- 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 broader view of the stock market downturn of 2001-2002
with numbers from the stock market bubble of the late 1990s:
||Dow Jones||% Chng.†||Notes
|January 1, 1997||1,291.03||—
|January 1, 1998||1,570.35||+21.63%
|January 1, 1999||2,192.69||+39.63%
|January 1, 2000||4,069.31||+85.58%
|January 14, 2000||4,064.27||-0.12%
||11,723.00||+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%
|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%
||Levels before September 11, 2001 Terrorist Attack.
|September 21, 2001||1,423.19||-16.05%
||8,235.80||-14.26%||Lows after markets reopened.
|January 1, 2002||1,950.40||+37.04%
|October 9, 2002||1,114.11||-42.88%
|January 1, 2003||1,335.51||+19.87%
- †Values represent percent change from previous date listed in table.