The stock market, as measured by the Dow Jones Industrial Average, has historically performed similarly to the economy. Usually a bear market occurs during a recession, and a bull market during an expansion. The history of the stock market since the Great Depression shows these are a natural, though painful, part of the business cycle.
Dow Highest Closing Record
The Dow historical closing high is 17,138.20 set July 16, 2014. However, overall volume this year is lower than in previous years, with only three days trading more than 200 million shares. This level of trading is more similar to that in the late 1990s, Volume has basically been declining since the Dow hit its low in March 2009. For more, see Dow Rockets, Volumes Plummet.
Nevertheless, the Dow continues to set new highs, after falling to 15,372.80 on February 3. Here's this year's streak:
- 17,068.26 on July 3 - the first time the Dow closed above 17,000!
- 16,976.24 on July 2
- 16,956.07 on July 1
- 16,947.08 on June 20
- 16,945.92 on June 10
- 16,943.10 on June 9
- 16,924.28 on June 6
- 16,836.11 on June 5
- 16,743.63 on June 2
- 16,717.17 on May 30
- 16,715.44 on May 13
- 16,695.47 on May 12
- 16,583.34 on May 9
- 16,580.84 on April 30
In 2013, the Dow gained 3,472.56 points,greater than any other year on record. Its percentage gain was 26.5%. Here's the closing records for the year:
- 16,576.55 on December 31
- 16,504.29 on December 30
- 16,479.88 on December 26
- 16,357.55 on December 24
- 16,294.61 on December 23
- 16,221.14 on December 20
- 16,179.08 on December 19
- 16,167.97 on December 18
- It set seven closing records in November, the last being 16,097.33 on November 27.
- 15,680.35 on October 29
- 15,676.94 on September 18
- 15,658.36 on August 2
- 15,460.92 on July 1
- 15,409.39 on May 28
- May 7, 2013 it closed at 15,056.20. It briefly rose above 15,000 for the first time ever on May 2, but couldn't sustain it.
- March 11, 2013, it closed at 14,254.38, taking five years to surpass its previous all-time record set in 2007.
The Dow's drop was more painful than in any other recession. It fell more than 50% in just 17 months. This was less than the 80% drop during the Great Depression, but that loss took three years.
On October 9, 2007, the Dow closed at its pre-recession all-time high of 14,164.43. However, fourth quarter GDP growth was -1%, announcing the start of the recession.(It was later re-estimated at 2.9%) The Dow started declining gradually. After the failure of Bear Stearns in April 2008, and a negative GDP report in Q2 2008, the Dow dropped to 11,000. Many analysts felt that this 20% decline was the market bottom.
However, on Monday, September 15, 2008, Lehman Brothers declared bankruptcy. On Wednesday, panicky bankers withdrew $144 billion from money market funds, nearly causing a collapse. In response, the Dow plummeted 13% in October. By November 20, 2008, it fell to 7,552.29, a new low. This was not yet the true market bottom. The Dow climbed to 9,034.69 on January 2, 2009 before screeching down to 6,594.44 on March 5, 2009.
On July 24, 2009, the Dow beat its January high, rising to 9,093.24 by close of day.
2001 RecessionThe Dow peaked on January 14, 2000, closing at 11,722.98, thanks to the boom in Internet businesses. It starting falling soon afterwards, hitting its first bottom of 9,796 on March 7. It bounced around until the markets closed following the terrorist attacks on September 11. When the markets reopened on September 17, 2001, the Dow dropped to 8,920.70. Threats of war drove the Dow down until October 9, 2002, when it closed at 7,286.27, a 37.8% decline from its peak. No one knew for sure if the bull market had begun until the Dow hit a higher low on March 11, 2003, closing at 7,524.06.
1998 Currency CrisisIn 1997, Thailand cut its peg to the dollar, leading to a devaluation in currency throughout Southeast Asia. A year later, Russia devalued the ruble and defaulted on its bonds. The stock market dropped 20%. The Long-Term Capital Management hedge fund nearly collapsed, threatening to push its banking investors into bankruptcy. Then-Federal Reserve Chairman Alan Greenspan convinced them to support the hedge fund, averting further disaster.
1990-1991 RecessionIraq invaded Kuwait in July 1990, causing the Dow to drop 18% in three months, from 2,911.63 on July 3 to 2,381.99 on October 16,1990.
1987 Stock Market CrashOn October 19, 1987 the Dow fell 22.6%, from 2,246.73 to 1,738.74. The stock market crash may have been caused by computer trading that forced sell orders when the market turned down. The Dow didn't regain its August 25, 1987 peak of 2,722.42 for two years. The loss of liquidity from this crash led to the Savings and Loan Crisis in 1989.
1980-1982 RecessionThe Dow dropped 16%, from a high of 903.84 on February 13, 1980 to a low of 759.13 on April 21, 1980. The Federal Reserve, under Paul Volcker, lowered the Fed Funds rate to 8.5% in response. The Dow rose to 1,004.32 on April 28, 1981. However,the Fed then raised rates to combat inflation, which reduced business spending. By August 12, 1982 the Dow had dropped 22.6%, to 776.92.
1973-1975 RecessionThe Dow dropped 45% from its peak of 1,051.7 on January 11, 1973 to its low of 577.60 on December 4, 1974. To find out the complicated causes of this recession, see Recession History.
1970 RecessionThe Dow dropped 30% between December 31,1968, when it hit its high of 908.92, and May 26, 1970, when it reached its bottom of 631.6.
1962 Cuban Missile CrisisThe U.S. launched an embargo against Cuba in February 1962. The Dow dropped 26.5% from its post-election height of 728.8 on December 1, 1961 to its June 26, 1962 low of 535.76. Tensions were heightened in October 1962, and the Dow dropped 2% the day after President Kennedy's speech.
1960 RecessionThe Dow dropped 13.9% from its December 31, 1959 height of 679.36 to its November 1, 1960 low of 585.24.
Recession of 1957The Dow dropped 14.1%, from its height of 506.21 on August 1, 1957 to its low of 434.71 on November 1, 1957.
Recession of 1953The Dow dropped less in this recession than it has done in most weeks in the 2008-2009 recession - only 7.5% between January 1 and September 1, 1953.
1949 RecessionThe Dow dropped 19.3% between June 1948 and June 1949.
1945 RecessionThe Dow fell 19.3% between June and October 1946. (Source: NBER, Business Cycle Expansions and Contractions)
The Great Depression
The Dow fell 90%. For more see, Stock Market Crash of 1929.
For more about the causes of these recessions, see Recession History