On this day in economic and business history...
Oct. 28, 1929, the original Black Monday, is one of two days most identified with the Great Crash that wiped out a generation of stock market gains. That day, the Dow Jones Industrial Average (INDEX: ^DJI) fell by 13.5%, a decline only surpassed once in the index's history. Different newspapers took diametrically different stances when reporting on the unprecedented collapse. The Los Angeles Times wrote of Wall Street "weed[ing] out speculative accounts and plac[ing] its house in order after the wild orgy of speculation ... which has taken place in the last five years." The Chicago Daily Tribune, however, gave full voice to the hysteria that had swept through the market:
The second hurricane of hysterical liquidation within four days hit the New York stock market today. It came suddenly and with awe inspiring violence, after holders of stocks had been lulled into a false sense of security by the rallies of Friday and Saturday.
It was a countrywide collapse of open market security values which in declines established and actual dollars and cents losses taken was probably the most far reaching in the history of the New York exchange.
It was calculated tonight that the total price shrinkage during the day in American securities on all exchanges had aggregated some 14 billion dollars.
More than 9 million shares were sold on Black Monday -- then the second-largest total in history behind Black Thursday, the aforementioned first "hurricane of hysterical liquidation." The estimated marketwide loss of $14 billion was worth nearly 15% of the national GDP, which makes it the largest single loss in GDP terms to this day -- the more recent Black Monday of 1987 only saw a loss equal to 10% of GDP. Many Dow stocks suffered terribly. AT&T (NYSE: T) lost $449 million in market value, General Electric (NYSE: GE) had $343 million of its market value destroyed, General Motors' market cap shrank by $204 million, and U.S. Steel lost $142 million. These four bellwether stocks were responsible for more than 7% of the day's total losses.
Washington officials reiterated President Herbert Hoover's earlier statement that business fundamentals were sound. An anonymous source close to the White House told The Washington Post that the crazed trading action of recent days was "something of an indication that the depression would not be prolonged, even with reference to stock prices."
The banking cabal led by JPMorgan (NYSE: JPM), established on Black Thursday in response to a record level of fear-fueled trading, offered no public statement, as it felt none was warranted. The bankers' silence only served to amplify the sell-off, as many investors appeared to believe this group was to serve as an implicit floor against steep declines, not to "merely supply bids where no bids existed," according to the Chicago Daily Tribune. The New York Times took the pulse of the market that afternoon and found it remarkably calm:
Many level-headed bankers and brokers expressed the opinion after the market's close ... that the reaction had been overdone, and that many stocks were worth in excess of their open market price on the year's earnings alone. It would be hard to find one in Wall Street who believed a month ago that any such situation as the present one would have been encountered.
Those bankers and brokers changed their tune eventually. They would have no choice as the great Crash of 1929 barreled onward into the history books.
All tapped out
The unfortunate traders crowding the stock exchange floor in 1929 had no bars to visit at the end of the day -- not legally, at least -- thanks to a vote on the Volstead Act that took place exactly one decade earlier, on Oct. 28, 1919. The Volstead Act, created to enforce the alcohol prohibition made law by the 18th Amendment, had a tortured journey through the halls of American power. It passed with overwhelming majorities in the House and the Senate, only to be vetoed by President Woodrow Wilson. The veto was immediately overridden by the House on Oct. 27. A day later, the Senate made the Volstead Act law by a vote of 65-20, ushering in the regrettable era of alcohol prohibition in the United States.
Many breweries failed, as might be expected, and underground crime quickly stepped in to fill the void. Many large brewers, including Anheuser-Busch, moved to producing other consumables out of the basic components of beer, such as yeast, ice cream, malt extract, and nonalcoholic "near beer." By one count, fewer than 20 pre-Prohibition breweries are still operating in the U.S.
The Crash of 1929 produced the second-worst percentage drop on record on Oct. 28. The Great Recession, in an unexpected moment of mirror-image symmetry, produced the Dow's second-best point gain in its history exactly 79 years later, on Oct. 28, 2008. The day's 889-point pop added 10.9% to an index already decimated by the accelerating global financial crisis. It was cold comfort: CNNMoney reported on the prior day's close as "the worst levels in more than five years, with the major gauges down more than 25% for October." The New York Times called the wild month "a tug of war," noting that:
After four mostly miserable weeks, a powerful afternoon rally left traders wondering if it was time to buy again. Shares, the bulls argued, have become too cheap to resist, despite signs of trouble in the economy. Many other investors, however, remained unpersuaded. ...
There was no single catalyst for the surge, and market specialists said investors seemed to be coming around to the idea that stocks were worth buying, given that the Dow had plunged 32% since the end of August. By some measures, stocks are cheaper than they have been in decades. Investors also may have also been looking ahead to a Wednesday meeting at the Federal Reserve, at which policy makers are expected to cut interest rates again.
The Dow's closing level of 9,065.12 points might have seemed fundamentally cheap, as it was 36% lower than the all-time high reached a year earlier. However, there was much farther to fall. Over the following five months, the Dow sank on news of economic decline, massive banking losses, and the near-collapse of America's auto industry before finally ending up at 6,547.05 points the following March, 28% lower than its close on Oct. 28, the second-best day in Dow history.
Department store beginnings
The first Macy's (NYSE: M) opened its doors on Oct. 28, 1858, only a decade after the world's first department store opened in New York City. Macy's first store, on Sixth Avenue, laid the foundations for a retail empire, but it would be decades before Macy's expanded beyond its single store. The company's Midtown Manhattan flagship store wouldn't open until 1902, and it didn't begin expanding beyond New York City until the Roaring '20s.
Macy's grew into an American retailing icon from these humble beginnings, enhancing its stature through the elaborate Macy's Thanksgiving Day Parade, which began in 1924. Today, Macy's welcomes shoppers into nearly 850 stores across the country, with a total of more than 150 million square feet of shopping space.
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