Definition of a Stock Market Crash

By Frank Bass – Updated Jul 28, 2025 at 1:03 PM | Fact-checked by Robin Hartill, CFP

Key Points

A stock market crash is a rapid, sharp drop in stock values, often over a week but sometimes as little as a day.
Historical crashes sometimes signal impending economic downturns.
In stock market crashes, avoid panic, assess company value over stock prices, and keep your focus on the long term.

There’s no official definition of a stock market crash, but chances are good that you know them when you see them, and chances are good that you haven’t seen all that many of them. By one yardstick, a crash is a rapid drop -- say, a week or less -- in a major stock market index, such as the S&P 500 or Dow Jones Industrial Average. Read on to learn more about stock market crashes, their history, and how to deal with them.

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Graphic of red arrows crashing into the ground. — Image source: Getty Images.

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The S&P 500 reached a peak of 1,527.46 on March 24, 2000, now known as the dot-com bubble. On April 14, the Nasdaq Composite index fell almost 10%. Fueled by busts like pets.com, the S&P 500 index had lost half its value by Oct. 9, 2002, as part of a slow-motion crash. The dot-com bubble bursting and subsequent market crash was blamed for one of the shorter U.S. recessions that only lasted from March until November 2001, but it had lasting effects. People who had put their money into Invesco’s QQQ exchange-traded fund (ETF), which tracked the Nasdaq-100, wouldn’t recover their losses for 16 years.
The global financial crisis of 2008-09 began to take shape in 2007 as investment bank Bear Stearns began to falter. Bad bets on the U.S. housing market, where prices had doubled between 1998 and 2006, led to catastrophic losses at some of the largest banks in the world. Between September and December 2008, the S&P 500 lost between 7% and 8% of its value in a single day -- four times. The index wouldn’t recover until April 2013.
The discovery of a contagious novel coronavirus that became known as COVID-19 didn’t spark a stock market crash in early 2020 -- but the shutdown of global commerce amid nationwide lockdowns to slow the pandemic did the trick. In March 2020, the Dow lost 6,400 points in barely four trading days, a 26% loss. A combination of the Federal Reserve Board cutting interest rates to almost zero and a $2.3 trillion stimulus package passed by Congress sped the recovery; by November 2020, U.S. markets had regained pre-pandemic levels.

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About the Author

Frank Bass is a contributing Motley Fool stock market analyst and editor covering energy, healthcare, consumer, and financial sectors. Frank has decades of experience in financial journalism, holding reporting and editing roles at The Wall Street Journal, The Associated Press, and Bloomberg. He also currently edits research on the global energy transition. He holds a bachelor’s degree in journalism from Texas Tech University and is a graduate student at the University of Alaska Fairbanks. Fun Facts: Frank has hiked The Long Trail in Vermont from end to end, and currently lives in a semi-dry cabin in Interior Alaska.

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