Market History 2008 Crisis Market Guide

2008 Financial Crisis, Housing Market Crash & Great Recession

Track SPY volatility through the 2008 financial crisis, housing market crash, real estate bubble collapse, and Great Recession from December 2007 through June 2009.

Section: Market Overviews Period: 12/2007-06/2009 Published: 2026-03-07 Updated: 2026-03-07

Great Recession 12/2007-6/2009

SPY Up Days
Jan 23, 2008: +2.14%	Mar 11, 2008: +3.71%	Mar 18, 2008: +4.24%	Mar 20, 2008: +2.40%
Apr 01, 2008: +3.59%	Apr 16, 2008: +2.27%	Jul 16, 2008: +2.51%	Jul 29, 2008: +2.14%
Aug 05, 2008: +2.87%	Aug 08, 2008: +2.39%	Sep 08, 2008: +2.05%	Sep 18, 2008: +4.33%
Sep 19, 2008: +4.03%	Sep 30, 2008: +5.42%	Oct 13, 2008: +11.59%	Oct 16, 2008: +4.25%
Oct 20, 2008: +4.77%	Oct 28, 2008: +10.79%	Oct 30, 2008: +2.58%	Nov 04, 2008: +4.09%
Nov 13, 2008: +6.92%	Nov 21, 2008: +6.33%	Nov 24, 2008: +6.47%	Nov 26, 2008: +3.53%
Dec 02, 2008: +3.99%	Dec 03, 2008: +2.58%	Dec 05, 2008: +3.66%	Dec 08, 2008: +3.84%
Dec 16, 2008: +5.13%	Dec 30, 2008: +2.44%	Jan 02, 2009: +3.17%	Jan 21, 2009: +4.35%
Jan 28, 2009: +3.36%	Feb 06, 2009: +2.68%	Feb 24, 2009: +4.01%	Mar 04, 2009: +2.38%
Mar 10, 2009: +6.37%	Mar 12, 2009: +4.06%	Mar 17, 2009: +3.21%	Mar 18, 2009: +2.09%
Mar 23, 2009: +7.08%	Mar 26, 2009: +2.33%	Apr 02, 2009: +2.87%	Apr 09, 2009: +3.81%
Apr 21, 2009: +2.13%	Apr 29, 2009: +2.15%	May 04, 2009: +3.38%	May 08, 2009: +2.40%
May 18, 2009: +3.04%	May 26, 2009: +2.63%	Jun 01, 2009: +2.59%	Jun 25, 2009: +2.15%

SPY Down Days
Dec 11, 2007: -2.53%	Jan 04, 2008: -2.46%	Jan 15, 2008: -2.49%	Jan 17, 2008: -2.91%
Feb 05, 2008: -3.20%	Feb 29, 2008: -2.71%	Mar 06, 2008: -2.20%	Mar 14, 2008: -2.08%
Mar 19, 2008: -2.43%	Apr 11, 2008: -2.04%	Jun 06, 2008: -3.08%	Jun 26, 2008: -2.93%
Jul 09, 2008: -2.28%	Jul 24, 2008: -2.32%	Sep 04, 2008: -3.00%	Sep 09, 2008: -3.42%
Sep 15, 2008: -4.71%	Sep 17, 2008: -4.71%	Sep 22, 2008: -3.82%	Sep 29, 2008: -8.79%
Oct 02, 2008: -4.03%	Oct 06, 2008: -3.85%	Oct 07, 2008: -5.74%	Oct 15, 2008 -9.04%
Oct 22, 2008: -6.09%	Oct 24, 2008: -3.45%	Oct 27, 2008: -3.18%	Nov 05, 2008: -5.27%
Nov 11, 2008: -2.20%	Nov 12, 2008: -5.19%	Nov 14, 2008: -4.17%	Nov 17, 2008: -2.58%
Nov 6, 2008 -5.03%	Nov 20, 2008 -6.11%	Dec 01, 2008 -8.93%	Dec 04, 2008: -2.93%
Dec 09, 2008: -2.31%	Dec 11, 2008: -2.85%	Dec 18, 2008: -2.11%	Jan 07, 2009: -3.01%
Jan 09, 2009: -2.12%	Jan 12, 2009: -2.26%	Jan 14, 2009: -3.35%	Jan 20, 2009 -5.29%
Jan 29, 2009: -3.32%	Jan 30, 2009: -2.27%	Feb 10, 2009: -4.91%	Feb 17, 2009: -4.55%
Feb 23, 2009: -3.47%	Feb 27, 2009: -2.35%	Mar 02, 2009: -4.67%	Mar 05, 2009: -4.26%
Mar 24, 2009: -2.04%	Mar 27, 2009: -2.04%	Mar 30, 2009: -3.48%	Apr 07, 2009: -2.39%
Apr 14, 2009: -2.00%	Apr 20, 2009: -4.28%	May 11, 2009: -2.15%	May 13, 2009: -2.70%
May 13, 2009: -2.70%	Jun 22, 2009: -3.06%

Summary

The housing market crash definitely played a huge role in the Great Recession, but it would be more accurate to view it as the first domino, rather than a single cause. Much of the groundwork for the Great Recession was laid during the Dotcom Bubble, with growing interest in safe things like real estate as the insane over-valuations of tech companies finally unwound. The rate cuts that helped the economy get over the bubble bursting made real estate investing even more accessible. Banks were more than happy to hand out mortgages like candy, without checking much into the solvency of their loan bearers. These careless practices turned into mass mortgage delinquencies. Leading into the next domino; selling stocks at the first sign of trouble. Huge banks began posting billion dollar losses, accelerating the flight out of the markets. Over-exposed trading firms began collapsing (leading to more stock sales to cover losses) and, ultimately, the largest domino, a credit/liquidity crunch. Now that banks were posting losses and losing funding (it was impossible to guess which bank could go under, safer to just run away) liquidity almost entirely dried up. Debt is the most essential cornerstone of the economy, without cheap loans expanding or maintaining business became almost impossible. So, companies did the most logical thing they could, start laying off workers to cut costs for lean times. This only made matters much worse. The unemployment rate pushed 10% by the peak of the recession and the effects were obvious. Without jobs, many people tightened their purse strings, unable to participate in the economy. Foreclosures spiraled out of control, home prices collapsed without buyers, and the same companies taking cost cutting measures were punished; no one to buy their products. Consistently terrible earnings reports dropped the market even further down and led to the collapse of many businesses. The most notable of which was the auto industry. Ford, Chrysler, and General Motors all teetered on the edge of bankruptcy, with only Ford escaping it. It didn’t help that these companies were notorious for making gas-guzzlers, during a time where oil peaked at $140 a barrel. Tens of thousands of lay-offs came from this industry alone, but it's worth noting that this applied to just about every sector of the economy. To make matters even worse, a slowdown in America’s economy affected most of the developed economies across the globe, to varying degrees.

Things only improved thanks to near zero interest rates in order to reignite the liquidity market and multi-trillion, tax-payer sponsored, internationally coordinated, bailouts. There were plenty of talks about financial reform and nationalization of struggling banks around this time, but none of this came to pass. Sure, mortgages became harder to get and credit controls were introduced, but no one was really held accountable for any of the suffering brought about during the Recession. The only lesson here seems to be that you can do basically anything you want if the economy depends on you.

Key Data to Keep Track of:

Housing and Foreclosure numbers

Corporate earnings reports

Labor department unemployment numbers

Manufacturing statistics

Announcements that the money printer has been activated (especially when the numbers are big)

FED announcements and comments

2007

December: Dec 11th (-2.53%)

The first official month of the Great Recession opened with a drop on 12/11, due to a 0.25% drop in interest rates from the FED. It appears that the FED’s acknowledgement of a deteriorating economic state by cutting rates almost exclusively contributed to the sell off. A strange quote was also recorded after the meeting; “Recent developments, including the deterioration of financial market conditions, have increased the uncertainty about what will happen next.” Housing prices and sales were both down, as was holiday spending. Corporate profits also began to signify signs of a slowdown

2008

January: Jan 4th (-2.46%), Jan 15th (-2.49%), Jan 17th (-2.91%), Jan 23th (+2.14%)

01/04 opened with a jobs report indicating the smallest employment growth in the past four years. Once again, worried investors sold off stocks and fled to Treasury bonds. A few days before this report, a weak manufacturing report also suggested the economy was showing signs of a slow down. Despite this, the Bush administration claimed that a recession was unlikely. 01/15 saw the Commerce Department reporting a drop in retail sales and Citigroup was forced to slash its dividend as a result of a ballooning $18 billion balance sheet loss due to mortgage losses. On 01/17, the FED acknowledged concerns about the state of the economy, noting that manufacturing had slumped and that the housing market would be a drag on the economy for the rest of the year. 01/23 opened strongly in the negative, but by close had more than recovered. Companies like Motorola and Apple posted earnings warnings, but an emergency FED rate cut the day before seems to have coaxed traders to buy the dip. Others wondered why the FED acted so early, unless the economy was already in dire straits.

February: Feb 5th (-3.20%), Feb 29th(-2.71%)

02/05 featured another crash, after the Institute for Supply Management posted a much worse than expected report on the service sector, which made up ⅔ of the US economy. Despite the FED cuts, the credit crisis seems to have already caused the US economy to unwind. 02/29 ripped down thanks to the worst earnings report in American International Group’s history, then the largest insurer in the U.S. Things accelerated after a report from Chicago indicated a six year low in business activity, which made the already existing poor economic data that much worse.

March: Mar 6th (-2.20%), Mar 11th (+3.71%), Mar 14th (-2.08%), Mar 18th (+4.24%), Mar 19th (-2.43%), Mar 20th (+2.40%)

03/06 saw the default of a major investment firm in the UK, Carlyle Capital, which was unable to pay its loans due to accumulated losses. Oil prices also hit new highs that day, making a quick economic recovery unlikely due to high energy costs. 03/11 witnessed a $200 billion dollar pump into financial markets from a global coalition of banks, including the FED, ECB, Bank of Canada, and Swiss National Bank. This action helped prop up prices, but did little to change the long term economic outlook, that said, prices soared. Only three days later, on 3.14, prices were in free fall again. This time, the FED and JP Morgan were forced to step in and bail out Bear Sterns. If one of the largest investment banks in the U.S. was at risk due to the credit crunch, it left one to wonder which other companies were under threat. In the days prior to this, Stearns had publicly insisted they were in good shape. The company’s shares dropped 47%. 03/18 saw a huge turn around, as Lehman Brothers and Goldman Sachs posted better than expected earnings, and investors were confident that another FED rate cut was just over the horizon. Just a day later, on 03/19, half of these gains evaporated, after an Energy Department report indicated that high oil prices were scaring off consumers, a report that sent both the stock market and the price of oil down sharply. Things balanced out just the day after, on 03/20, gold and oil (most commodities infact) prices took a hit downwards as Freddie Mac and Fannie Mae both saw analyst upgrades, reigniting hope that ease of credit will bring back the distressed housing market. Additional economic data that came out also suggested things were not as bad as expected.

April: Apr 1st(+3.59%), Apr 11th (-2.04%), Apr 16 (+2.27%)

Prima Aprilis was truly odd in 2008. $19 billion in write offs at UBS and another $4 billion at Deutsche Bank related to mortgages were reported from the first quarter. Lehman Brothers and Fannie Mae saw the most attention for investors, with plenty of investors jumping into the fire sale. The general mood among buyers, seems to have been that the worst had passed, despite the billion dollar losses. Under different conditions, these reports could have only led to a major sell off. 04/11 saw General Electric, known for rarely missing earnings, reported a nasty -5.8% drop in profits, an event that seems to have shaken the market very greatly. A report indicating consumer confidence had dropped to 26 year lows was released as well, 04/16 brought some much needed hope back, as Intel, JP Morgan, CSX, and Wells Fargo all posted better than expected earnings, suggesting that maybe the economy wasn’t slowing down so much.

June: Jun 6th(-3.08%), Jun 26th(-2.93%)

06/06 ripped the market down with the largest jump in unemployment since 1986. Making matters worse, oil jumped $6 a barrel in one day, which negatively impacted just about every single stock on the market. Hopes that the US would quickly recover from the recession were looking grim and were a large part in fueling the recovery since March lows. 06/26 saw a series of stock downgrades; Goldman Sachs predicted additional writeoffs from Citigroup and Merill Lynch, and outright downgraded Citigroup to “strong sell”. Goldman was also downgraded by Wachovia. Plenty of other financial firms were sold off, and even General Motors received a downgrade.

July: Jul 9th (-2.28%), Jul 16th (+2.51%), Jul 24th (-2.32%), Jul 29th (+2.14%)

07/09 brought with it huge losses in Freddie Mac (-24%) and Fannie Mae (-13%), as investors began to lose hope in these companies' abilities to guarantee loans. Oil also resumed its bullish uptrend, as tensions with Iran suggested a possible conflict in the Middle East and therefore difficulty in extracting oil. Finally, tech giants like Intel and Cisco Systems were also getting hit with downgrades. 07/16 saw the oil rally breakdown, partially thanks to easing of international tensions which would have affected oil prices, as well as concerns that letting oil go too far would also impact the US economy negatively. 07/24 saw a boom in home sales, suggesting that weakened consumer confidence was hurting the housing market. House builders had their largest drops ever recorded, and existing home sales reached their lowest level in a decade. Ford had its biggest drop since 2000, after posting an earnings report with losses twice as big as expected. The company's heavy losses were from restructuring and turnaround costs. Ford was in the middle of its "Way Forward" plan. Coupled with weak U.S auto market conditions, and high labor legacy costs. Ford incurred an operating loss of ~$5 billion. 07/29 pumped again thanks to the U.S. Steel posted its net income more than doubled, mostly due to the higher price of steel. The price of oil also slumped downwards.

August: Aug 5th (+2.87%), Aug 8th (+2.39%)

08/05 saw the price of oil drop down to three month lows, the FED kept rates steady, suggesting that inflation was now under control. 08/08 suggested that the US economy may finally have begun to heal. McDonald’s reached its all time high in 43 years of trading, after a strong July earnings. The dollar traded at an 8 year high against the euro, and oil prices continued their downward descent.

September: Sep 4th (-3.00%), Sep 8th (+2.05%), Sep 9th (-3.42%), Sep 15th (-4.71%), Sep 17th (-4.71%), Sep 18th (+4.33%), Sep 19th(+4.03%), Sep 22nd (-3.82%), Sep 29th (-8.79%), Sep 30th (+5.42%)

The good times, however, were not meant to be. 9/4 losses were triggered after Bill Gross, leader of the largest fund, Pimco, suggested that the US government should allow the Treasury to buy debt and other corporate assets in order to prevent “a financial tsunami”. The fate of Lehman Brothers continued to appear grim, after it announced its LibertyView hedge fund posted loses. 9/8 broke news of a government takeover of Freddie Mac and Fannie Mae, giving investors hope that the government was willing to do what it took to prevent disaster, most however, were not so optimistic about future failures. The doubters needed to wait only until the next day; 9/9. News broke out that Lehman Brothers, the #4 investment bank in the US, had failed to secure an investment from Korea Development Bank. Without this capital, it seemed likely that Lehman Brothers would collapse into insolvency; its shares dropped 45%,

More trouble was still on the horizon. On 9/15, American International Group needed a bailout; “Governor David Paterson of New York said the state would allow AIG to lend itself $20 billion to bolster its capital as it faces potentially disastrous credit downgrades.” It would take a Federal Reserve bailout to save AIG. Bank of America also began the process of assimilating Merill Lynch and Lehman Brothers through their bankruptcies. Bad news for heavy weights created no shortage of fear. Just two days later, on 9/17, the market would fall by the exact same amount. Panic had spread globally (Russia, in particular, was going through a financial crisis at this time) at this point, with some of the largest financial institutions at risk, investors were fleeing to Treasury bills and gold. With no one willing to offer credit to the markets, costs to borrow jumped for still solvent companies, making the situation even worse. The next day, 9/18 saw the previous days losses wiped out. President Bush attempted to calm nerves about the state of the U.S. economy, world banks were moving to provide liquidity, additional rules were even implemented restricting short selling (799 stocks in total!). The credit problem still remained unaddressed. 9/19 kept bullish momentum going, most likely thanks to the US govt now showing an active interest in the state of the economy. It’s worth quickly noting that the week spanning 9/15-9/19 was one of the most volatile to date. There would be worse days to come, but 4/5 days saw movement of over 4%! A crazy time to have your life savings pegged to the stock market.

9/22 opened on Monday with another brutal beatdown. A government bailout plan had not yet been decided, and it would take some time before both parties approved a package pleasing to their constituents. In the meantime, oil also exploded again to all time highs, this time as a safe haven asset. A week later, on 9/29, history was made, with the worst drop in two decades, at that time. $1.2 trillion had exited the market by the closing bell. The largest contributor here was Congress’ inability to pass a bailout plan. The next day, 9/30, despite no changes in the bailout plan collapsing, markets boomed. Optimism that it would eventually pass won out and there were plenty of bargains to be found for the time being. Credit markets had still not recovered either.

October: Oct 2nd (-4.03%), Oct 6th (-3.85%), Oct 7th (-5.74%), Oct 13th (+11.59%), Oct 15th (-9.04%), Oct 16th (+4.25%), Oct 20th (+4.77%), Oct 22nd (-6.09%), Oct 24th (-3.45%), Oct 27th (-3.18%), Oct 28th (+10.79%), Oct 30th (+2.58%)

Borrowing rates hiked again on 10/2 and another bailout vote was still scheduled out. Simply puts, things crashed again seemingly due to that one fact alone. A government bailout plan was struck the following day, to the fancy tune of $700 billion, but markets still slid. By 10/6, governments in Europe were scrambling to shore up major banks in Italy, Germany, Belgium, and France. News of economic downturns spread all across Asia, with only China posting trade surpluses. The price of oil also collapsed. Investors hope that the bailout could save things were dashed, as the fear had spread globally. 10/7 saw the sell-offs get substantially worse, as the ECB mentioned that its primary concern now was the slow down in growth, rather than managing inflation. No actual plans were mentioned. 10/13 opened with one of the largest single day gains on record, largely thanks to an international effort by central banks to increase the flow of liquidity in global markets. There’s one comical quote from the NYT article from that day:“The market clearly was getting priced for an Armageddon, a depression, for the end of Western civilization as we know it,” said Edward Yardeni, the investment strategist. “A lot of people realized these were extraordinarily good prices to buy stocks.” Only two days later, on 10/15, nearly all the gains were wiped out. After the bailout hype wore off, reality that the economy had in fact significantly slowed down crept back in. Domestic manufacturing and retails sales both fell and Intel, despite posting a profit, offered weak guidance, propelling the notion that it may take a while for things to recover. 10/16 appears to have been an insanely volatile day. NYT reports that markets were down around -4% at 10am! The article ends on a grim note and it is fairly difficult to determine why the market recovered as much as it did. A poor manufacturing report for the Philadelphia area (worst in 18 years) was initially held accountable, but hope appears to have come in the form of a better than expected inflation report. Since inflation was under control, investors could count on rate cuts later down the line.

10/20 opened with an announcement from the Federal Reserve Chair that a stimulus package was in the works. In addition to this, cooperation between global banks had finally yielded noticeably positive changes in the credit markets. 10/22 saw bailout hype get summarily crushed again, this time as Merck and Wachovia announced missed earnings and huge layoffs. Global worries of a long term recession continued to settle in. 10/24 saw the US markets selling off in lockstep with foreign ones. In Asia, Toyota, Sony, and Samsung all posted disappointing earnings and forecasts. The UK announced its economy had fallen for a third quarter in a row, leading to sell offs across Europe. Domestically, Chrysler announced layoffs of 25% of its workforce. The day saw lows of -6%, but things recovered towards the close. 10/27 kept the nosediving going, the price of oil and energy companies collapsed as energy demand slid alongside an economy in decline. Most of the decline appears to be related to sell-offs in Asia, which were made worse by the yen’s appreciation against other currencies, which led to exports becoming more expensive, greatly damaging future forecasts for Japanese manufacturers. A bailout package was also announced for Hungary by the IMF. Just the next day, on 10/28, a consumer confidence report revealed that Americans were at their most pessimistic about the state of the economy in the past 41 years. Despite this decidedly bad news, the market closed over +10%! Aside from stocks (once again) reaching bargain prices, investors were confident that the FED would announce a substantial rate cut the next day. 10/30 opened divisively, as bad economic reports continued to pile on, the silver lining, however, was the the FED funds rate continued to drop and liquidity in credit markets was expanding

November: Nov 4th (+4.09%), Nov 5th (-5.27%), Nov 6th (-5.03%), Nov 11th (-2.20%), Nov 12th (-5.19%), Nov 13th (+6.92%), Nov 14th (-4.17%), Nov 17th (-2.58%), Nov 20th (-6.11%), Nov 21st (+6.33%), Nov 24th (+6.47%), Nov 26th (+3.53%)

Apparently the strongest Election day in history was another inconsistent day. The government posted a huge drop in manufactured goods orders, but banks around the world continued to slash rates, seemingly nullifying the effects of this report. Investors were also glad that the uncertainty surrounding the presidential election was soon coming to a close, or perhaps just buying into the bargains.The optimism barely lasted, as a slew of earnings reports the next day sent the market tumbling again on 11/5. General Motor’s finance division posted a loss of $2.5 billion, Time Warner announced a muted guidance, MBIA and Ambac posted losses approaching and exceeding a billion, respectively. The grim reality continued into 11/6, as GM suggested it was barely surviving, Cisco Systems announced bleak forecasts. Retailers expected the worst holiday seasons to come, and the week was expected to close with a Labor Department report on unemployment, which Wall Street had begun to price in as “worse than expected”. 11/11 opened with General Motor’s stock reaching 1942 levels, oil prices crashing as energy demands cratered, Tyco International took its worst hit in 5 years, and fears of a miserable 2009 set in.

11/12 continued the pain, with Macy’s posting a $44 million loss in sales, and Best Buy slashing next year’s guidance due to consumer spending fears. The market was also patiently awaiting the details on a planned government stimulus package. 11/13 opened abysmally, down -3% by midday. There doesn’t seem to be a good reason for the 10% swing in prices for the day, other than people trying to buy the bottom (which the SPY had reached earlier in the day). Earnings were mixed for the day, but the Dow going under 8,000 and the aforementioned SPY bottom seem to be the most likely culprits for the buying spree. 11/14 proved the trick could not be pulled twice, despite markets going green for some time, the sell off deepened into the final minutes of the day. That day, the FED chair claimed the US economy was still under severe stress, Freddie Mac posted a $25 billion loss, J.C. Penny and Abercrombie & Fitch also reported dismal sales drops. A stock friendly Christmas did not appear to be in the cards. This concluded another week where 4/5 trading days were extraordinarily volatile. 11/17 slid on account of no new economic remedies coming out of Washington over the weekend. News from Tokyo announced that a recession had been officially confirmed and the dismal state of U.S. automakers, namely Ford and GM, created worries about the many jobs at risk of loss. Even in Germany, Volkswagen posted a huge sales loss.

Later that week, 11/20, the market returned to 1997 levels, led by concerns that banks like Citigroup, JPM Chase and Bank of America are still too weak, despite receiving billions of dollars in government bailouts. It was also announced that not a dime of the $700 billion bailout would be used for distressed mortgages. Most of America’s automakers were teetering on bankruptcy, high unemployment numbers and low retail sales all contributed to an utterly gloomy day. The consistent trend of next day turn arounds continued on 11/21. Wiping out the previous days losses was seemingly single handedly done by Obama’s nomination of Geithner. It seems like any replacement would have triggered a rally, as Paulson had become quite unpopular due to his insistence on using the bailout money to buy stocks of distressed companies, rather than buying their troubled assets. A great boon for Wall Street, but truth be told, I’m inclined to agree with Paulson’s approach. Why should the taxpayer bailout these companies without receiving compensation, as opposed to just buying their garbage? The market, at any rate, was exuberant. 11/24 rolled around, with yet another government bailout announcement, this time for the much distressed Citigroup. A truly huge one. The government injected $20 billion into Citigroup and guaranteed $306 billion of Citi’s assets that were at risk of losing all their value! Despite this clearly being a bad deal for the taxpayer, Wall Street seems to have taken this news very well. 11/26 closed out the volatile month with more gains, as Obama and a myriad of federal officials were active in easing concerns on the state of the U.S. economy, the optimism from the previous bailout suggested hope that General Motors would receive one as well, causing the stock to run up. Optimism appears to have slightly returned that things might turn around by the end of the year.

December: Dec 1st (-8.93%), Dec 2nd (+3.99%), Dec 3rd (+2.58%), Dec 4th (-2.93%), Dec 5th (+3.66%), Dec 8th (+3.84%), Dec 9th (-2.31%), Dec 11th (-2.85%), Dec 16th (+5.13%), Dec 18th (-2.11%), Dec 30th (+2.44%)

Optimistic investors were brutally punished on 12/1. One simple cause here: the National Bureau of Economic Research formally declared that the US economy had entered a recession last December. Better late than never. Despite the brutal crash and a bleak outlook, 12/2 saw plenty of buybacks. For one, it’s been obvious for months that the economy had been in a recession, secondly, banking institutions and governments around the world were all collaborating to keep things from spinning out of control. Even GM executives were lurking in Washington in an attempt to secure a bailout. 12/3 continued the dip buying, despite a slowdown being announced in the service sector and the FED announced worsening economic conditions across the country. Neither report seems to have affected the market, perhaps these things were already “priced-in”. 12/4 changed this attitude, as AT&T announced 12,000 layoffs, Credit Suisse 5,300, Dupont and a variety of media companies did as well. 12/5 was quite a strange day, as the much anticipated unemployment numbers came out, and were significantly worse than expected (300k expected vs 533k actual). Despite this, the market soared. Ford, Chrysler, and General Motors were all present in Washington to beg for billions in bailouts, all three seemed keen on avoiding bankruptcy proceedings. Many were also still confident in “bargain” prices across many different industries, including banking, even if the immediate future would still see more pullbacks. This is the first week on file where 5/5 days showed up, quite the psychological Tour de France for traders. 12/8 was precipitated by a boom in European and Asian markets, caused by another wave of internationally coordinated market cuts before, as well as hopes for additional stimulus packages.

12/9 saw another Treasury bill auction, which actually saw investors buying 0% interest 4-week bills and negative yield 3-month notes. Why not just keep cash, I don’t know, but clearly investors were seemingly fine losing money here instead of on the stock market. In other news, FedEx slashed its profit guidance for 2009, and Sony also announced 8000 layoffs. 12/11 brought news of a widening trade deficit, as exports dropped 2.2%, applications for unemployment benefits were about 50,000 more than expected. On 12/16, the FED delivered a shocking rate cut, bringing down the overnight rate to 0 to 0.25% range, down from over 1%. The large moved markets almost immediately by 3%. Support from the FED in maintaining the market seems to have gone a long way. Despite opening well thanks to an improved jobs data report, and talks by the Obama administration for another $850 billion stimulus package, oil prices broke under $40 a barrel, reflecting that the global economy had truly become paralyzed.and with no end in sight. Fedex posted a good earnings report, but still fell due to instituting a hiring freeze, pay cuts, and lay-offs. One the last decisions of the Bush administration saw the Treasury purchasing a stake into GMAC (General Motor’s auto financing arm) worth $5 billion, as well as providing a $1 billion loan. In the course of the past month, the government agreed to inject $17.5 billion into keeping both Chrysler and GM alive. The year closed with the SPY still down 40%, but still significantly up from the lows of the year.

2009

January: Jan 2nd(+3.17%), Jan 7th (-3.01%), Jan 9th (-2.12%), Jan 12th (-2.26%), Jan 14th (-3.35%), Jan 20th (-5.29%), Jan 21st (+4.35%), Jan 28th (+3.36%), Jan 29th (-3.32%), Jan 30th (-2.27%)

1/2 was the first trading day of the New Year and opened with a bang. There doesn’t seem to be a particular reason for it, perhaps continued positive sentiment from the announced government bailouts. Or, hopes that the new administration would be even more committed to resolving the decline in the market. For novelty’s sake, I included another NYT article from that day that covers many of Wall Street’s superstitions, the first trading day began with a rally, which many hoped was a good omen. An economic report that indicated manufacturing was still in the dumps did not derail the rally. Sadly, reality, once again, caught up. On 1/7, Alcoa announced it was laying off 13,000 workers and a National Employment Report indicated that the economy had lost 693,000 jobs in December. Those are absolutely gargantuan numbers. 1/9 saw a decent open, but a report from the Bureau of Labor statistics seems to have sealed the markets fate, after it announced a 7.2% unemployment rate, revised from a slightly less painful 6.8%. Intel and Walmart both warned of significantly worse profit expectations, and Time-Warner announced it expected an operating loss for 2008. Yet more pain on 1/12, in wake of the bad news just a few days before, markets braced themselves for a miserable earnings season. The banking sector led the decline in markets this time around, especially Citigroup, which fell -17% after announcing plans to sell its brokerage house 1/14 saw the sell offs continue thanks to a retail sales report indicating that spending was down -10% since last December, and had dropped 2.7% in the past month alone - double what was expected. Without retail support, expectations for the future were grim. On the day before 1/20, the Royal Bank of Scotland forecast a $41.3 billion loss for 2008, sending US markets down sharply the following Tuesday. Bank of America announced yet more layoffs, and Chrysler struck a non-binding alliance with Fiat, which would doom the company to never again produce a reliable automobile. Most attention seems to have been diverted to Washington, as President Obama had just been inaugurated.

1/.21 saw bargain buying of banking stocks, IBM posted good earnings and a good outlook for 2009, bringing the rest of the tech sector alongside it. The “Obama bounce” was slowly beginning. 1/28 saw bank stocks run once more, this time due to a suggestion by the Treasury secretary that the FDIC could take over toxic assets from commercial banks, essentially freeing them of their liabilities. How much this would help is uncertain, but investors were thrilled nonetheless. 1/29 broke the rally, with unemployment numbers and home sales both hitting record lows. Kodak posted its worst earnings report in history, and was followed by Allstate, which posted a similarly rough outcome. Both companies announced layoffs. Qualcomm and Airline stocks also presented dismal earnings outlooks. 1/30 saw things break down even further, thanks to a GDP report indicating the economy had shrunk at a rate of 3.8% in the final three months of 2008. In addition to this, Exxon Mobile announced an earnings drop off of 33%, thanks to collapsed oil prices as well as massively decreased consumption. Related to this, Honda reported its earnings had shrunk 90% in the last quarter!

February: Feb 6th(+2.68%), Feb 10th (-4.91%), Feb 17th (-4.55%), Feb 23th (-3.47%), Feb 24th (+4.01%), Feb 27th (-2.35%)

2/6 opened with a jobs data report indicating 7.6% (3.6 million since the recession started) of America was unemployed, with 600,000 of those being lost in the past month. Largest loss in 35 years. The key development of the day, however, was a stimulus bill passed by the Senate. $110 billion in government cuts and around $800 billion set aside for legislation. 2/10 saw the details of this plan released by the Treasury secretary and despite nearly $2 trillion in total being set aside for the endeavor, the market crashed. The primary focus of the bailout plan was directed towards consumer and commercial credit liquidity, as well as a government program to buy up banks toxic assets. The market was not impressed, it seems; "It's this kind of buy-the-hope, sell-the-news mentality that the market's taken over the last few months," said Dean Curnutt, president of Macro Risk Advisors. "The administration's very focused; they're clearly working around the clock to create a plan. That being said, these are just enormous financial problems." 2/17 started with economic crises in Hungary and Romania, which generated much concern across the European market, as well as selloffs in basically the entire global market. Obama signed the first leg of a $800 billion bailout, but investors were concerned it wasn’t enough money! The beatings continued on 2/23, with the SPY hitting 1997 levels (prayers for anyone retiring around this time). It’s difficult to pinpoint what exactly caused the downturn here, aside from general malaise. The US government did announce that they would begin stress testing banks to see which ones were healthier than others as part of its bailout plans, but the mechanics were vague and not many people seemed to be interested in speculating as to which banks would be successful or not.

2/24 soared thanks to comments from the FED chair that the government would not be pursuing nationalization of banks it was bailing out, which greatly calmed shareholders worried about getting wiped out by state mandated buyouts. Earnings from retailers like Target and Home Depot still posted losses, but the news that the private banking system would be supported by the new administration far outweighed the continued weakness of the economy. 2/27 saw a revised GDP report, announcing that the fourth quarter of 2008 fell at an annualized rate of 6.2%, the worst since 1982 and almost twice the 3.8% that was reported earlier. Fears of the recession getting even deeper began to set in.

March: Mar 2nd(-4.67%), Mar 4th (+2.38%), Mar 5th (-4.26%), Mar 10th (+6.37%), Mar 12th (+4.06%), Mar 17th (+3.21%), Mar 18th (+2.09%), Mar 23th (+7.08%), Mar 24th (-2.04%), Mar 26th (+2.33%), Mar 27th (-2.04%), Mar 30th (-3.48%)

Global selloffs in Asia, and particularly in Europe, trickled into Wall Street on 3/2. A bail out deal for Hungary ended with a rejection and a survey suggesting an even larger job loss to be reported the coming Friday brought prices down everywhere. Concerns that governments weren’t doing enough to bailout the banks contributed, while others thought that the problems were more systemic than they appeared to be, and shoveling money at the problem would not resolve it. On 3/4, hope sprang from China, as it was rumored that its stimulus package would exceed the $585 billion it had already proposed. The new lows brought in plenty of bargain hunters, who on just the next day, 3/5, were humbled. News came out of Australia that short selling had been halted, and the SEC fined a number of firms for cheating their customers out of profits. These included E-Trade, Goldman Sachs, TD, and others. A report from General Motors auditors also suggested that the company”was not viable”, greatly undermining one of America’s largest auto producers. 3/10 saw a huge pivot, seemingly thanks to a tiny glimmer of hope; the much reviled CitiGroup had managed to generate a profit in the first two months of ‘09, the best it had done since the third quarter of ‘07. The only source for this was a memorandum from the CEO. Bank stocks soared, lifting the general market with them. A comment from the FED chair also drip-fed some hope, who suggested broad, but ultimately meaningless comments on financial reporting regulations. Things would not change.

3/12, in spite of Freddie Mac posting a $23.9 billion dollar loss, optimism continued. This was largely thanks to Obama signing in a $410 billion dollar spending bill. 3/17 released a report indiciating better than expected housing sale numbers, despite drops in outlook for both Alcoa and Nokia. On 3/18, the Federal Reserve announced plans to buy $1 trillion of government debt and mortgage backed securities, in an attempt to loosen credit markets and restart lending. Financial stocks once again soared, uplifting the market. The big number seems to have convinced investors that the government was on board to bailout the market, scott free. 3/23 saw one of the best days in months. Details were filled into $500 billion of the $1 trillion spending plan. The housing market in particular was looked at with gusto, as most U.S. real estate had greatly depreciated over the past 18 months. Almost ¾ of the bailout was addressed to mortgages and cheap money was now being provided to invest in it: “This is the free-money rally,” said Barry Ritholtz, chief executive of Fusion IQ, an investment and research firm. “Traders like the fact that there’s a boatload of cash headed their way.”. 3/24 clipped the optimism, as the reality was that the U.S. and global economies were still in dire straits. Concerns over how effective the bailout would be also reared their head.3/26 more talk of sweeping financial reforms was brought in the market, suggesting that steps would be taken to prevent future crises. The Federal Reserve cut its target interest rate to nearly 0% and good profit outlooks from Google, Intel, and Microsoft contributed to uplifting the general market. 3/28 nearly zeroed out the previous days gains, this time seemingly due to cautious sell-offs. The past three weeks had been some of the best the market had seen in a long time. First quarter earnings and additional economic reports were still looming. The big headline on 3/30 was the feared bankruptcy proceedings of General Motors. Panic around the auto industry was bad enough that even Obama commented that its transformation would be a painful process that same morning. Suffice it to say, panic over the fate of tens of thousands of additional job losses jarred the market.

April: Apr 2nd(+2.87%), Apr 7th (-2.39%), Apr 9th (+3.81%), Apr 14th (-2.00%), Apr 20th (-4.28%), Apr 21st (+2.13%), Apr 29th (+2.15%)

Government leaders around the world pledged additional market rescues on 4/2. A key point by U.S. lawmakers was continued leniency on mark-to-market accounting. This gives companies more leeway in valuing mortgage backed securities and helps make banks look more profitable on paper. Despite promises to institute financial reforms, it seems that less regulation was the path chosen. Labor Department numbers that adjusted the unemployment rate higher than before, left no impact. 4/7 The prior month’s gains continued to get sold off, as earnings reports were now just around the corner, with banks being the first to report. Widespread corporate dividend slashes were also announced. 4/9 took the market up again, thanks to Wells Fargo, the nation’s largest consumer bank. Last quarter it had posted a $2 billion loss, but this time, a $3 billion profit.In addition to this, Wells claimed that it was rapidly issuing mortgages. Perhaps the bottom had finally been found.

4/14 just barely qualified, but poor economic data results on both retail and wholesale sectors led to a downturn. More earnings were around the corner, and despite better than expected earnings being responsible for the recent comeback in stocks, the future was still murky. 4/20 momentarily confirmed these fears, as despite Bank of America posting excellent earnings (given the times) investors still sold off bank stocks. The primary worry seems to relate to accounting maneuvers that banks were now allowed to engage in thanks to mark-to-market standards loosening. This, combined with concerns of continued credit card and commercial real estate defaults and the ongoing government stress test of banks, triggered a sharp sell-off. Bank of America dropped -20% despite the earnings beat. BOA was one of the last financial earnings to be released, uip next were industrials and consumer products, which were expected to fare much worse, given the recent state of affairs. 4/21 saw a turnaround thanks to the written testimony from the Congressional oversight panel, which affirmed that a vast majority of banks had more capital than they needed, allaying fears of board financial sector insecurity and guaranteeing that government aid would reach most banks. Corporate earnings for Caterpillar and BNY Mellon were mixed today, but not worse than expected. Government assurances that banks were able to continue lending was all that the market needed, not to mention the bargain prices banks were at just the day before. 4/29 started showing signs of a slow recovery. Consumer spending had slightly increased after six straight months of decline.Dreamworks and Time Warner beat expectations in their earnings reports, and the $800 billion stimulus package was soon to kick into gear. GDP was reported to have continued its sluggish pace of 6.1% annualized in the first 3 months of ‘09, but it was still .2% better than the last months of ‘08, and caused no serious effect on prices that day.

May: May 4th (+3.38%), May 8th (+2.40%), May 11th (-2.15%), May 13th (-2.70%), May 18th (+3.04%), May 26th (+2.63%)

Star Wars day saw the losses of 2009 break even, despite the market still being down 40% from all time highs. Optimism that the government’s stress tests would ultimately calm fears about the state of the financial sector prevailed. Concerns of a swine flu pandemic that emerged just the week before, began to ease.Financial stocks were the biggest winners of the day, with many booming over 10%. 5/8 brought with it news of another 539,000 jobs being lost the prior month, but apparently this news must have become fairly commonplace by now; the market did not react. The key news here were the results of the much anticipated government stress test of major banks. Many banks were still facing huge losses on consumer and mortgage loans, however, the only demand the government made from the top 10 banks was to raise $75 billion in additional capital. This ended up being much less money than analysts expected, suggesting that banks did indeed have enough money on reserve. The safety of the financial sector against a deepening crisis was seemingly secured. Gloom returned again on 5/11. General Motor’s CEO suggested bankruptcy was inevitable for the company. Finance stocks also dropped, as they began to raise capital to meet government fund demands. Some were forced to slash dividends in order to meet these obligations.

5/13 brought with it a Commerce Department report, claiming that retail sales dropped 0.4% in April, despite most economists predicting it coming out flat. Despite a positive outlook for banks, OPEC speculated that oil demand would continue to slump for the year, Many were also unconvinced that the market had gotten out of the woods, especially while it was still uncertain that the recent run up in stock prices was an actual recovery in prices, or just another bear trap. 5/18 saw continued hope in banking stocks. Goldman Sachs named the company a conviction buy. Bank bailout recipients (such as Wells Fargo and Morgan Stanley) indicated they were committed to exiting the government’s Troubled Asset Relief Program and were raising new unsecured capital towards that end. Lowe’s posted an earnings miss, but they still beat expectations, sending the stock up 8.1%. The National Association of Home Builders reported its index of rose, suggesting new builds and home purchases were returning, if very slowly. A surprise rebound in consumer confidence came out on 5/26, which hit its highest level in eight months. That same day, a report that housing prices were continuing to slide at a rapid pace did not phase the market. More foreclosed real estate to buy up at better prices, perhaps.

June: Jun 1st (+2.59%), Jun 22nd (-3.06%), Jun 25th (+2.15%)

6/1 opened with big news, General Motors finally declared bankruptcy. The news seems to have come as no shock by this point, despite contributing to many painful market days in the months before. GM was temporarily delisted from the market and removed from the top 30 blue chip stocks on the DOW, a big day for a company that, at one point, had a 54% market share in America. In other news, the Chinese economy had seemingly begun to recover, construction spending increased month to month, and consumer disposable incomes grew 1.1%. An interesting factoid from this article, apparently in August of 2005, the average American’s saving rate dropped below zero for a brief moment, meaning that on average, most over consumed with easy credit, in the form of credit cards or home equity loans. The bears came back to play one last time on 6/22, egged on by a cut in growth forecasts from the World Bank. Developed countries across the board were expected to have slow earnings. To make matters worse, the White House predicted a 10% unemployment rate in the coming months, at the time the rate was already sitting at 9.4%.Second quarter earnings were also around the corner and a Federal Reserve meeting the same week. The Fed was expected to keep interest rates near zero levels, but concerns around inflation going out of control as a result were growing. 6/25 saw retail earnings lead the way, with Bed, Bath, and Beyond, Dress Barn, and Tween Brands all doing much better than expected. This reignited hopes that the consumer was finally getting healthier. More unemployment benefit claims came in, but optimism about retail seems to have shut out concerns.

InfoLib

2008 Financial Crisis, Housing Market Crash & Great Recession

Read Next