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YEAR 2002: STOCK MARKET CRASH

 Young Guys Finance

July 28, 2016

The downturn in the stock market in 2002, also known as stock market crash or internet bubble bursting, saw a drastic drop in stock prices across the US, Canada, Asia and Europe. It can be seen as the culmination of different events that happened right before the crash.

The stock market was enjoying a decade long bull run where the Dow rose 15% per year from 1995 to 2000. However, several events started to unravel that led to market corrections. Besides the tragic human loss, the September 11 terrorist attack also had a financial impact closing the New York Stock Exchange for a period of time. While the markets were able to recover, they began sliding again in March 2002.

Following the bursting of the Dot.com bubble, many internet companies declared bankruptcy including WebVan, Exodus, Communications and Pets.com. Companies such as Amazon, eBay and Yahoo! survived the bubble burst but dropped significantly in value. For more info on the Dot.com bubble check out our previous blog here.

Accounting scandals from Arthur Andersen, Adelphia, Enron and WorldCom also had a substantial impact on the markets. Investor’s confidence was damaged.

Stock Market Crash

Stock market crash 2

Scale of losses

  • 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
  • The total market value of NYSE (7.2) and NASDAQ (1.8) companies at the time was only $9 trillion, for an overall market loss of $9.3 trillion