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Quote of the Day
This is a serious event that resulted in the halting of the trading of our stock today. It is what happens when people are irresponsible and don’t check facts.
– United Airlines spokeswoman after a false news story of United’s bankruptcy causes the company’s stock to fall 75% in minutes.
September 8th – This Day in Stock Market History
September 8th, 2008 – Government Bailout of Fannie and Freddie Sparks Relief Rally
On September 8, 2008, Wall Street reacted to an unprecedented government takeover in the housing finance sector. The U.S. Treasury had seized control of Fannie Mae and Freddie Mac the day before to prevent the collapse of the two mortgage giants at the heart of the credit crisis.
In response, stock markets soared in relief on this day. The Dow Jones Industrial Average jumped 289 points (+2.6%) and the S&P 500 rose +2.0%
Financial stocks led the charge – major banks rallied 5–7% and homebuilder shares climbed sharply as investors hoped the bailout would stabilize the housing market.
While the intervention did bolster confidence that trillions in mortgage-backed securities would be backstopped by the government, the news was grim for Fannie’s and Freddie’s shareholders: their stocks plunged ~80% overnight as the Treasury placed the firms into conservatorship – effectively wiping out common equity.
September 8th, 2008 – False Bankruptcy Report Triggers UAL Stock Plunge
In a startling case of misinformation moving markets, September 8, 2008 saw United Airlines (UAL) stock crash due to a false news report declaring the company bankrupt.
Early that day, an old 2002 news article about United’s past bankruptcy filing was accidentally republished on a Florida newspaper’s website and picked up by a news service as if it were a new news story.
The effect was immediate panic: within minutes UAL’s share price plunged about 75%, from around $12 to $3
Nearly $1 billion of United’s market value evaporated in a flash as traders, algorithms, and even Bloomberg News believed the airline had suddenly gone bankrupt. The stock was halted for volatility, and once the error was recognized trading resumed and the stock rebounded most of the loss (though still down about 11% for the day).
The Guardian later detailed how an innocuous Google search and a chain of lapses led to Bloomberg disseminating the outdated story. This mini-crash on no real news showed just how vulnerable markets are to erroneous information in the digital age.
September 8th, 2008 – LSE Trading Outage Paralyzes London’s Market
September 8, 2008 was an eventful day not only in New York but also in London – for a very different reason. That Monday, the London Stock Exchange (LSE) suffered a massive trading outage.
A technical glitch struck around 9:00 a.m. local time, just moments after the FTSE 100 index had surged nearly 4% at the open on the Fannie/Freddie bailout news.
Trading was frozen for the next seven hours, leaving no one on the exchange able to buy or sell shares. This abrupt halt on one of the year’s busiest trading days (banks were soaring double-digits on the news) left traders frustrated and in the dark as to what was happening.
Trading only resumed at 4 p.m., giving a frantic 30-minute window before the close – during which the FTSE 100 leapt a bit further to finish +3.8% for the day. While the market’s direction that day was positive, the glitch robbed many participants of the chance to trade in an orderly fashion.
Reads of the Day
The Sept. 8, 2008 plunge in United Airlines stock triggered by a mistaken bankruptcy headline wasn’t the first time the company had been caught in turbulence. Hard Landing takes readers inside the dramatic battles that reshaped the airline industry in the late 20th century. Petzinger profiles the larger-than-life executives—like Robert Crandall of American Airlines, Frank Borman of Eastern, and Richard Ferris of United Airlines—who fought ruthlessly for dominance in the skies.
Airlines are a very difficult business – Even when there aren’t false stories of your company going bankrupt! And this book does a great job detailing the history of the industry, its deregulation, cut-throat competition, and the bold personalities that made today’s modern aviation industry and its boom-and-bust cycles. For investors, it offers timeless lessons on how leadership decisions, regulation, and competition can make or break entire industries.
<— Go to Previous Day: September 7th (1901 – Stocks fall 4.43% after the assassination attempt on President McKinley)
Go to Next Day: September 9th (2008 – Lehman Brothers stock falls 45% as rumors swirl about the firm’s impending failure) –>