September Is the Dow's Cruelest Month

This article remembers key events that have shaped Wall Street history.

September, not April, has historically been the cruelest month for the Dow Jones Industrial Average (INDEX: ^DJI) . No month in the Dow's history was crueler than September of 1931, which obliterated 31% of the index's value from start to finish. Sept. 18 was not the single worst day of that month, but it remains the worst Sept. 18 of any Sept. 18 that saw market activity.

Political turmoil in London was the source of today's panic in 1931, and by the close of trading the Dow had lost over 5% of its value. It was the second-largest drop of the year, and was attributed to uncertainty over the likelihood of fresh national elections in England. London's bankers had warned that elections posed a danger to the stability of the pound sterling, according to a special report from the New York Times.

Nearly $9 million in gold stocks were withdrawn from the Bank of England by the Dutch government, which added fire to the panic of Sept. 18, 1931. At 1931 prices, this withdrawal would have been worth 32,624 pounds of gold, which would be valued at approximately $925 million today. This massive withdrawal led directly to England's suspension of the gold standard the very next day.

AT&T (NYS: T) felt the pangs of the panic worse than most. Its daily decline erased $79 million in market capitalization, and the company had at that point lost over $1 billion of its value over the course of the year. By the end of trading on Sept. 18, 1931, AT&T was valued at $2.7 billion.

Chase National Bank -- precursor to JPMorgan Chase (NYS: JPM) -- and the Fox Film Corporation sought to tamp down long-running rumors that the two entities' relationship had turned combative. Fox had expanded rapidly during the pre-crash bull market, and was in receivership at the time the report was issued, necessitating a close banking relationship.

The New York Times reported that problems in the relationship had first cropped up in 1930, the result of accounting irregularities between Fox's reports and those of Chase's auditors during efforts to refinance $55 million in one-year debt. This would be equivalent to about $760 million today. It may seem like a lot, but News Corp (NAS: NWSA) , Fox's modern parent, carried $15.2 billion in long-term debt on its balance sheet in its most recent quarter.

An editorial by Earle Crowe in the Los Angeles Times on Sept. 18, 1931 claimed that "somewhere along the line, the fundamental bottom will certainly be found. The chances are, from any sane point of view, that the selling of securities has already gone too far in relation to the status of business and industry." Unfortunately, it would be nearly a year before the Dow reached its lowest point, having lost another 64% from the day of Crowe's call for recovery.

AT&T struggled in 1931, but it was simply too important to the nation's communication needs to fail. It would continue to pay dividends every quarter to the present day, as it had since 1893. That's the definition of a rock-solid dividend stock. The Fool's put together the best list of unbreakable dividends you can find, and you can find all nine (including AT&T) in our most popular free report. Click here to claim your copy at no cost now.

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