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 suffered.
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 14, 2000.
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.
|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%||11,723.00||+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%||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%||9,605.50||-9.28%||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%||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%|
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