How 9/11 Affected the U.S. Stock Market

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The 9/11 attacks shut the U.S. stock market for four trading days and produced one of the sharpest weekly declines on record once it reopened. The New York Stock Exchange and Nasdaq did not open on September 11, 2001, and stayed closed until Monday, September 17. On that first day back, the Dow Jones Industrial Average fell 684 points, or 7.1%. By the close on Friday, September 21, the Dow was down more than 14% for the week, the S&P 500 had lost 11.6% and the Nasdaq 16%, erasing an estimated $1.4 trillion in market value. Airline and insurance stocks took the worst losses. Defense contractors and some technology, communications and pharmaceutical companies gained.

What Happened to the Stock Market on the Morning of 9/11

The market never opened that day. American Airlines Flight 11 struck the North Tower of the World Trade Center at 8:46 a.m. Eastern, and United Airlines Flight 175 hit the South Tower at 9:03 a.m. Both impacts came before the 9:30 a.m. opening bell. The towers stood only a few blocks from Wall Street. Later that morning a third hijacked jet hit the Pentagon, and a fourth, headed for Washington, D.C., crashed near Shanksville, Pennsylvania, after passengers fought back. Nearly 3,000 people were killed.

Exchange officials decided not to open. Some later asked why the market was “closed before the attacks.” It wasn’t. Trading on Monday, September 10, had been normal, and there was no crash that day. The Dow closed near 9,606. The stock market was not open the next day either. Neither the NYSE nor Nasdaq traded on September 11 or for the rest of that week.

Why the Market Stayed Closed for Four Days

Two problems kept the exchanges shut. The first was practical. The NYSE building was not damaged, but the collapse of the towers severed communications lines serving lower Manhattan, and the Ground Zero recovery operation nearby made access and reopening harder. Many trading, brokerage and financial firms had offices in the World Trade Center and could not operate. Bond trader Cantor Fitzgerald, based near the top of the North Tower, lost 658 employees.

The second was the fear of panic selling into a market that could not function properly. Regulators and exchange leaders wanted connectivity restored, firms relocated to backup sites and safeguards in place before trading resumed. The government bond market, which depends less on a single trading floor, reopened on September 13.

Policymakers used the pause to prepare for the reopening:

• Federal Reserve: The Fed supplied large amounts of liquidity to banks in the days after the attacks. Before the open on September 17, it cut the federal funds rate target by half a percentage point, from 3.5% to 3%.
• SEC: The Securities and Exchange Commission issued emergency orders that temporarily relaxed restrictions on companies buying back their own shares, so firms could support their stock when trading resumed.

How Much the Stock Market Dropped After 9/11

When the NYSE reopened on September 17, the Dow fell 684.81 points to about 8,921. That 7.1% loss was the largest one-day point drop in the index’s history at the time. Larger point drops have occurred since, notably during the 2020 coronavirus sell-off.

Selling continued all week. By the Friday close the losses compared with pre-attack levels were:

• Dow Jones Industrial Average: down more than 14%
• S&P 500: down 11.6%
• Nasdaq Composite: down 16%

That was the worst week in NYSE history up to that point, with roughly $1.4 trillion in market value wiped out. The drop happened in a market that was already weak. The dotcom bubble had been deflating since 2000, and the U.S. economy had entered a recession in March 2001. The attacks hit investors who were already anxious about earnings and growth.

Whether this counts as a “crash” depends on the definition. A one-week fall of 11% to 16% across the major indexes is a severe decline. It did not, however, turn into a lasting bear-market leg beyond the slide already underway from the dotcom collapse.

Which Stocks Were Affected by 9/11

Airlines

Airline shares fell further than any other group. The FAA had grounded all civilian flights, and investors expected passengers to stay away once planes flew again. The two carriers whose planes were hijacked were hit hardest. American Airlines shares fell 39% between September 11 and the close on September 17, and United Airlines (UAL) dropped 42%. Travel-related businesses such as hotels, cruise lines and travel companies also sold off as investors priced in a collapse in tourism and business travel.

Insurers

Insurance companies faced claims on an unprecedented scale: property damage, business interruption, aviation liability, life and workers’ compensation. Insured losses eventually reached about $40 billion. Warren Buffett’s Berkshire Hathaway, which owned large reinsurance operations, was among the biggest losers. Most insurers had enough cash reserves to pay their obligations and survived the hit. Afterward, many stopped offering terrorism coverage. Congress responded with the Terrorism Risk Insurance Act of 2002, which created a federal backstop for terrorism-related insured losses.

Banks and Brokers

Financial firms with operations in lower Manhattan were disrupted directly, and bank shares came under pressure as investors weighed the risks to the financial system and the economy. Options traders bet heavily on further declines in banking shares, as they did with airlines and insurers.

Stocks That Rose

Not everything fell. Defense and weapons contractors gained as investors anticipated more government spending on the military and what became the war on terror. Some technology companies tied to security and surveillance also rose, along with communications firms and pharmaceutical companies.

Gold and Oil

Commodity markets reacted as well. Gold prices jumped nearly 6% to about $287 per ounce as investors moved toward assets seen as safe havens. Oil and gasoline prices spiked on fears that Middle East supplies would be disrupted. Within about a week both returned to around their pre-attack levels, because no further attacks followed and crude shipments to the U.S. continued without interruption.

Did Traders Sell or Buy? The Options Market

When markets reopened, most of the flow was selling, but trading was split along sector lines. On U.S. options exchanges, including the Chicago Board Options Exchange, volume rose on both sides:

• Put options, which gain value when a stock falls, were bought in large numbers on airline, banking and insurance shares.
• Call options, which gain value when a stock rises, were bought on defense and military-related companies.

In the short term, many of these option buyers profited, since the sectors moved roughly as they had bet.

The Insider-Trading Allegations

Questions about who made millions from 9/11 usually point to unusually heavy put buying on United and American Airlines shares in the days before the attacks. The theory was that people with advance knowledge, possibly the terrorists themselves, bet against the stocks. The SEC and the FBI investigated these trades. The 9/11 Commission reported that some unusual trading did occur but that each trade it examined had an innocuous explanation. In the most cited case, a large share of the pre-attack United puts was bought by a single U.S. institutional investor with no ties to al Qaeda as part of a broader trading strategy. The Commission found no evidence that anyone with advance knowledge of the attacks profited through the securities markets.

How Quickly the Market Recovered

The losses of that week did not last long. Stocks began to rebound in late September, helped by Fed rate cuts that continued through the end of 2001 and by the absence of further attacks. By the end of the year, the Dow, the S&P 500 and the Nasdaq had all closed above their September 10 levels. The recession the economy had been in since March ended in November 2001.

Markets were not done falling, though. Corporate accounting scandals and the continued fallout from the dotcom collapse pushed stocks to new lows in 2002 before a sustained recovery began. Over the longer run, the S&P 500 has multiplied in value since 2001, despite steep declines such as the 2008 financial crisis and the 2020 pandemic sell-off. The S&P 500 quote page shows its current level and long-term chart.

What Changed in Trading After the Twin Towers Fell

The shutdown showed how much the market depended on physical infrastructure in a few blocks of Manhattan: trading floors, data lines and staff who had to be in specific buildings. In response, exchanges, banks and regulators invested in backup sites outside the city, redundant communications and formal business-continuity plans. The NYSE and other exchanges also moved further toward electronic trading, so that orders no longer relied as heavily on people on a floor.

That shift made U.S. markets less vulnerable to a physical attack but more exposed to a digital one. Harvey Pitt, who chaired the SEC on September 11, 2001, later described the ability to hack into financial systems as today’s equivalent of a 9/11 attack and warned that a potential “black swan” event exists every day. Federal Reserve Chair Jerome Powell said in an April 2021 CBS interview that cyberattacks had become the leading risk to the financial system, ranking above the kinds of factors that caused the 2008 crisis.

The Long-Term Economic Cost

The market recovered relatively quickly, but the economic consequences of 9/11 continued. Security spending rose across government and private industry, and the U.S. entered long wars in Afghanistan and Iraq. Those wars were financed mostly with borrowing rather than tax increases.

According to the Watson Institute at Brown University, taxpayers had already paid nearly $1 trillion in interest on debt used to fund the two wars. The institute projects those interest costs could reach $2 trillion by 2030 and $6.5 trillion by 2050. These are projections, not settled figures, but they mean that part of the cost of 9/11 for the U.S. economy will keep accumulating for decades after the market’s losses were made back.

The Bottom Line

For investors weighing how markets handle sudden shocks, 9/11 shows a severe but short-lived sell-off: after a four-day closure and a week of steep losses, the Dow, S&P 500 and Nasdaq all closed 2001 above their September 10 levels. Airlines and insurers suffered most, while defense stocks and gold rose. The longer costs came from war borrowing and a shift to electronic trading that traded physical risk for cyber risk.