Final answer:
Stock prices dropped quickly in 1929 due to investor panic and a massive sell-off following economic instabilities and reliance on margin buying. Black Tuesday saw a rush to sell stocks before further decline, resulting in substantial financial losses and marking the start of the Great Depression.
Step-by-step explanation:
The stock prices dropped so quickly in 1929 primarily because of a massive panic among investors, which resulted in a frenzied sell-off. This panic was further exacerbated by several underlying economic weaknesses. While the companies' intrinsic value hadn't necessarily plummeted since the summer, what changed was the public's perception and confidence in the stock market. The use of margin buying, where investors bought stocks with borrowed money, meant that when stock prices fell, many were unable to repay these loans, leading to bank failures and further economic decline.
On Black Tuesday, October 29, 1929, investors rushed to sell their stocks before prices fell any further. The drastic drop in prices that day marked the culmination of the crash, causing devastating financial losses nationwide. The crash didn't occur in isolation; it was the tipping point of an already weakening economy, with poor banking practices, questionable Federal Reserve policies, bad income distribution, and shaky international economics.
The market's decline started in the summer and accelerated as panic spread through the investor community. Efforts by bankers to stabilize the market were insufficient, and by November, the market had lost an astronomical sum, a direct blow to the American economy. This event marked the beginning of the Great Depression, a period of widespread economic hardship that lasted throughout the 1930s.