The Friday the 13th mini-crash was a
stock market crash that occurred on Friday, October 13, 1989. The crash,
referred to by some as "Black Friday", was apparently caused by a reaction to a news story of the breakdown of a $6.75 billion
leveraged buyout deal for
UAL Corporation, the parent company of
United Airlines
United Airlines, Inc. (commonly referred to as United), is a major American airline headquartered at the Willis Tower in Chicago, Illinois. . When the UAL deal fell through, it helped trigger the collapse of the
junk bond market. The deal unraveled because the
Association of Flight Attendants
The Association of Flight Attendants-CWA (commonly known as AFA) is a union representing flight attendants in the United States. As of January 2018, AFA represents 50,000 flight attendants at 20 airlines. Since 2004, AFA has been part of the Comm ...
pulled out of the deal when management, in negotiations over an
Employee Stock Ownership Plan (ESOP) designed to fund the leveraged buyout, refused to agree to terms.
The close
Moments after the UAL deal fell through, the
indices began their plunge. When the closing bell rang, the
Dow Jones Industrial Average
The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States.
The DJIA is one of the oldest and most commonly followed equity inde ...
had dropped 190.58 points, or 6.91 percent, to 2,569.26; the
NASDAQ
The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...
Composite had shed 14.90 points, or 3.09 percent, to 467.30; and the
S&P 500
The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. As of ...
Index had fallen 21.74 points, or 6.12 percent, to 333.65. The
Dow Jones Transportation Average fell 78.05 (5.26%) on the 13th, and fell another 102.04 (7.26%) on the 16th for a total decline of 12.13%. The major indices had closed at all-time highs as recently as Monday, October 9.
Survey
Many investors were left stunned. Since most market participants blame the UAL deal as the culprit, survey researcher William Feltus and
Robert Shiller, the author of ''
Irrational Exuberance'', conducted a telephone survey of 101 market professionals in the business days following the crash, asking if they had heard about the UAL news before or after the crash: 36% surveyed said they had heard about it before the losses set in, and 53% said afterwards.
The market professionals also believed that the UAL story was just an attention-grabber, with traders trying to find a reason to sell: 50 percent believed that was the reason while 30 percent believed the news would reduce future takeovers.
Harvard International Review - Exuberant Reporting Media and Misinformation in the Markets
Aftermath
The crash is often pinpointed as the start of the early 1990s recession
The early 1990s recession describes the period of economic downturn affecting much of the Western world in the early 1990s. The impacts of the recession contributed in part to the 1992 U.S. presidential election victory of Bill Clinton over incu ...
, but the surprisingly-low growth rates (almost 0 percent) during the summer months and the savings and loan crisis earlier in the year had triggered the crisis almost concurrently with the mini-crash, which, in turn, got blamed by the public (the memory of the 1987 crash still being fresh) as the true culprit of the recession.
See also
* Black Monday (October 19, 1987)
References
*{{cite book, last=Woodward, first=Bob, author-link=Bob Woodward, title=Maestro: Greenspan's Fed and the American Boom, year=2000, publisher=Simon & Schuster
Simon & Schuster () is an American publishing company and a subsidiary of Paramount Global. It was founded in New York City on January 2, 1924 by Richard L. Simon and M. Lincoln Schuster. As of 2016, Simon & Schuster was the third largest publi ...
, place=New York, page
63–64
isbn=978-0743204125, url-access=registration, url=https://archive.org/details/maestrogreenspan00wood
1989 in economics
1989 in the United States
Stock market crashes
October 1989 events in the United States
Friday the 13th