For most investors, August and September in 2011 were the most miserable – and memorable — months in nearly three years.
The stock market’s volatile swings stunned investors, sending many into Treasurys. The market has not seen consistent volatility this extreme since the financial crisis in 2008.
Even more interesting, the majority of the most volatile days of the year occurred in these two months — right down to the last day of September, when the S&P 500 fell 2.5 percent and a key volatility index hit 43.
Click ahead to see the eleven most momentous days of 2011 — based on the S&P 500's percentage price change, trading volume and VIX level — and the events that made these days so extreme.
By Jennifer LeighParker
Posted 3 October 2011
Price Change: -2.05 percent
Trading Volume: 4.36 billion shares
VIX Index: 20.8
Trigger: Libyan Turmoil
The escalating unrest in Libya, where ruler Muammar Gaddafi vowed to crush any revolution, lifted April crude oil futures more than 8.5 percent, a high for the year that still has not been surpassed. This sent stocks tumbling, on what was then the second heaviest volume day of the year.
Until this point, the chain of civil unrest in Arab states - which included the resignation of Egyptian President Hosni Mubarak – had not impacted any major exporter of crude. Events in Libya, however, raised concerns that unrest could disrupt the flow of oil from other key producing countries.
Price Change: -1.95 percent
Trading Volume: 4.76 billion shares
VIX Index: 29.4
Trigger: Japan’s Nuclear Meltdown
Trading was extremely choppy as investors tried to understand the economic impact of the catastrophic 9.0 earthquake in Japan. On this day, the U.S. Embassy in Tokyo advised American citizens who lived within 50 miles of the damaged Fukushima Daiichi nuclear plant to evacuate. Investors worried the damaged reactors could potentially create even more economic chaos if radiation continued to leak.
Price Change: -4.48 percent
Trading Volume: 5.47 billion shares
VIX Index: 31.66
Trigger: Weak Payrolls Report
Stocks plummeted on anticipation of a weak non-farm payroll and unemployment rate data due out the following day, and rumors of an imminent downgrade of the US long-term credit rating. After weeks of public bickering, Congress missed the August 2nd deadline to raise the US debt ceiling, sparking fears of the unthinkable — the triple-A rating of the U.S. could be downgraded.
Price Change: -6.66 percent
Trading Volume: 7.49
VIX Index: 48
Trigger: S&P Downgrades US Credit Rating
On the most dramatic day of the year thus far for US stocks, the S&P 500 logged its biggest one-day percentage decline amid record trading volume. This gloomy Monday was a direct result of the previous Friday's big news, announced after the market closed, that the United States lost its top-notch triple-A credit rating. Standard & Poor's said the move reflected the lack of a credible plan in Washington to attack the nation’s long-term debt.
Price Change: 4.74 percent
Trading Volume: 7.12 billion shares
VIX Index: 35.06
Trigger: Fed Signals Low Interest Rates
The market had its biggest up day of the year, right after its largest drop of the year. Driving the rally was the Federal Reserve’s FOMC statement, saying it would keep interest rates exceptionally low until at least mid 2013.
Price Change: -4.42 percent
Trading Volume: 6.57 billion shares
VIX Index: 42.99
Trigger: French Bank Exposure to Greek Debt
On the back of US credit downgrade, rumors of a French sovereign debt downgrade sparked another huge selloff. Fears of a Lehman-style event in the French banking system — because of the banks' large exposure to Greek debt — drove investors to the safety of US Treasurys.
Similar concerns hit US banks. Bank of America, was particularly hard hit, despite reassurances from CEO Brian Moynihan that the US banking conglomerate was not in need of additional capital. Shares of Goldman Sachs, Morgan Stanley and Citigroup also plunged, losing more than 10 percent.
Price Change: 4.63 percent
Trading Volume: 5.72 billion shares
VIX Index: 39
Trigger: Strong Cisco Earnings
The stock market swiftly reversed course again, as strong earnings from tech-giant Cisco Systems provided a welcome respite from the gloomy news in the financials sector.
Weekly jobless claims released in the morning also contributed positively, as the report showed fewer Americans joining the unemployment line the prior week.
Price Change: -4.46 percent
Trading Volume: 5.1 billion shares
VIX Index: 42.67
Trigger: Falling Philly Fed Manufacturing Index
Fresh signs of economic weakness triggered this selloff.
The closely watched Philadelphia Federal Reserve's regional manufacturing index dropped to minus 30.7 in July, which indicated severe a contraction in economic activity during the period. The number was far worse than expected and one of many suggesting weakness.
Price Change: 3.43 percent
Trading Volume: 4.05 billion shares
VIX Index: 36.27
Stocks bounced back, following the morning release of an FDIC report saying US commercial bank earnings rose sharply to $28.8 billion in the second quarter.
The report also showed that bank-loan portfolios grew for the first time in three years, and loan balances posted a quarterly increase.
The absence of negative headlines out of Europe also helped.
Price Change: -3.19 percent
Trading Volume: 5.62 billion shares
VIX Index: 41.35
Trigger: Operation Twist
It took a day for the Federal Reserve's latest monetary stimulus package to sink in, but when it did people might have been thinking of Bernanke’s words at the “Operation Twist” news conference the day before. “There are significant downside risks to the economic outlook, including strains in global financial markets".
The Fed’s plan to sell $400 billion in short term treasuries in order to invest that amount in longer-term Treasurys was clearly no tonic.
As a kicker, reports out of China showed weaker-than-expected manufacturing growth, causing worry about its ability to prop up the global economy.
Price Change: -2.05 percent
Trading Volume: 3.57 billion shares
VIX Index: 42.96
Trigger: European Debt Crisis
Worries over the debt crisis in Europe hit a new peak, as losses in the banking sector made a crisis spill-over into the financial system a tangible reality.
Morgan Stanley (MS) plunged over 10 percent. Bank of America (BAC), JPMorgan (JPM) and Citigroup (C) also fell sharply.
Adding to the market fears, economists at Goldman Sachs predicted a 40-50 percent chance of recession in the Euro zone, as a result of the debt crisis.