S&P 500 · August 31, 1998
The day Russia's default reached America
-6.80%
single-day change vs previous close
Part of a longer stretch
Russia's default and LTCM
near the end of it · 1998-07-17 → 1998-08-31, -19.34% over the whole period
What happened that day?
- The S&P 500 fell 6.8% on the day
- Mid-month Russia had stopped paying its domestic debt and given up defending the rouble
- The amount was not large in global terms. The problem was that those holding the bonds with borrowed money were shaken with it
- One large US hedge fund in particular had been running dozens of times its capital, and its losses far exceeded what it had
- Letting it fail would have caught the banks on the other side of its trades, so the Fed gathered them and brokered a rescue
- Three Fed cuts that autumn ended the phase, and the final two years of the dot-com bubble begin here
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.