Nasdaq · August 27, 1998

After Russia said it would not pay

-4.62%

single-day change vs previous close

Part of a longer stretch

The Russia shock on the Nasdaq

midway through · 1998-07-20 → 1998-10-08, -29.55% over the whole period

What happened that day?

The Nasdaq fell 4.62% on the day
Mid-month Russia had stopped paying its domestic debt and given up defending the rouble — a rare case of a country not paying debt issued in its own currency
The amount was not large in global terms. The problem was that whoever held those bonds in size was shaken with it
In particular a large US hedge fund was collapsing. It ran borrowed money at several times its capital, so losses far exceeded what it had
If it were not unwound, the banks on the other side of its trades would be caught in turn. The Fed eventually gathered those banks and brokered a rescue
Three Fed rate cuts that autumn ended the phase, and the Nasdaq went from here into the final two years of the dot-com bubble

Sources

Every figure on this page is recomputed from the original daily closing prices and checked against them at build time. The account of what happened is written from the sources listed above.