On the first day of NYSE trading after 9/11, the market fell 684 points, a 7.1% decline, setting a record for the biggest loss in exchange history for one trading day. At the close of trading that Friday, ending a week that saw the biggest losses in NYSE history, the Dow Jones was down almost 1,370 points, representing a loss of over 14%. The Standard and Poor's (S&P) index lost 11.6%. An estimated $1.4 trillion in value was lost in those five days of trading.
Throughout the remainder of the year, the Dow Jones Industrial Average gradually rose toward pre-September 11levels and closed at 10,022 on December 21,2001. Real GDP contracted in the first three months of 2001 by 2.7 percent, which was a surprisingly strong performance under the circumstances. The six-member panel at the National Bureau of Economics Research(NBER), which is considered the nation’s arbiter of U.S. business cycles, declared in November 2001 that a recession had begun in March and ended in November of that year, eight months after it had begun.
Stock market plunges are widely reported headlines news. One result of these plunges is that many Americans feel poorer because of the threat to their life’s saving, In only a few hours, spectacular paper losses reduced the wealth that people are counting on to pay for homes, automobiles, college tuition , or retirement. Although not all U.S. households own stock, everyone fears a steep downhill ride on the Wall Street roller coaster. If a stock market crash leads to a recession, it would cause layoffs and cuts in profit sharing and pension funds, businesses fear that man families will postpone buying major consumer item in case they need their cash to tide them over the difficult economic times ahead, Reluctance of consumers to spend lowers aggregate demand and, in turn, prices and profits fall. Falling sales and anxiety about a recession may lead many business executives to postpone modernization plans, Rather than buying new factories and equipment, business continue with used plants and machinery, which means lower private investment spending, employment, output, and income for the overall economy.