Extreme Market Dislocation: The September 11, 2001 Terrorist Attacks

 
On September 11th, 2001, Islamic terrorists hijacked and then flew two jumbo jet airliners into the World Trade Center in New York City; a separate plane into the Pentagon in Washington, D.C.; and a 4th plane into a remote field in Pennsylvania. In all, nearly 3,000 people were killed and the United States had been attacked on its own soil by terrorists.

Airline traffic across the U.S. came to a standstill, and all major exchanges throughout United States closed. In Tokyo, the Nikkei stock index sold off and fell below 10,000 for the first time since 1984.

In early October, 2001, the United States initiated military action against terrorist factions in Afghanistan, beginning the march to a broader war. The terrorist attacks and the notion of a war as a response by the United States set in motion panic and turmoil in global financial markets.

September 2001 and the ensuing period was highlighted by a flight to quality in many markets, huge equity selloffs (and then rallies), and in general markets that were thought to be uncorrelated now seemed to correlate and converge.