Wall Street Explained: History, Naming & Importance
Wall Street is arguably one of the most renowned and famous streets globally, situated in New York City. However, its significance transcends mere infrastructure.
So what is Wall Street exactly, what is the history of Wall Street, and how is it important to investing and trading? Here’s what you need to know:
TL;DR:
Wall Street is a famous street in New York's Financial District
Wall Street homes major financial institutions like the Federal Reserve and NYSE
Wall Street originated as a wooden wall built by Dutch settlers in the 17th century to protect them against attacks
What Is Wall Street?
Physically, Wall Street refers to a street in New York City in lower Manhattan. It is also referred to as “the Financial District” because it houses multiple financial institutions and big banks.
Additionally, the US Central Bank, the Federal Reserve, and the New York Stock Exchange (one of the largest exchanges globally) are located there.
Figuratively, however, Wall Street is used to symbolize the financial markets, investments, and publicly-traded companies, even if they aren't physically situated on the street itself. Some even argue that Wall Street has become synonymous with the US financial system.
The History Behind the Name “Wall Street”
While today, Wall Street is a street name, it originally referred to a wooden wall dating back to a 17th-century Dutch colony in New York.
Historically, in the 16th century, European countries established colonies on various continents, including America. The Dutch, in particular, arrived in New York in ships via the Hudson River and built a colony. The colony was then named “New Netherland” or “New Amsterdam.”
In 1652, during the Anglo-Dutch Wars, Dutch settlers built a wooden wall to defend themselves against potential attacks from British pirates. The wall spanned over 713 meters in length and stood approximately 2.7 meters tall. It featured two gates, now known as the corner of Wall Street and Pearl Street.
The wall collapsed after 50 years but was rebuilt in 1693 to guard against potential French attacks, only to collapse again in 1699.
From a Tree to a Stock Exchange: The Emergence of the NYSE
Wall Street's association with the financial sector dates back to the Buttonwood Agreement of 1792 when 24 US stockbrokers and merchants signed a pact under a buttonwood tree on Wall Street in New York City.
This agreement was established in response to an economic collapse and financial panic in 1792, sparked by loose lending practices and speculative activities in the securities market. To address these challenges, a group of the US' most prominent stockbrokers and merchants convened to sign an agreement aimed at restoring financial stability.
They committed to trading exclusively with each other under agreed-upon rules, ensuring reliable transactions and legitimate investments.
This agreement laid the foundation for Wall Street and the establishment of the New York Stock Exchange which officially opened in 1903 on 18 Broad Street.
The Introduction of the Stock Ticker on Wall Street
An American inventor named Edward A. Calahanis credited for introducing the famous tickers we see on Wall Street and in movies.
Calahanis introduced the stock ticker on Wall Street in 1867. The ticker, which nowadays is a screen, was originally a machine with wheels of narrow paper strips that detailed transactions and were dispensed to clerks.
Why Is Wall Street Important?
Wall Street bears both economic and cultural significance. It is at the epicenter of the trading realm, as it is home to some of the biggest financial institutions in the world, including the Federal Reserve, major banks, and the New York Stock Exchange.
In addition, it is culturally significant as it plays a role in movies (as a wealth motif and a symbol of finance) and has shaped society as we know it today.
Finally, Wall Street is also important due to the fact that it extends loans to various businesses both in the USA and globally.
Wall Street Crashes
Despite its significance and prowess, Wall Street suffered some of the biggest stock market crashes in history.
Black Thursday (1929)
On October 24, 1929, a wave of panic selling from overbought markets materialized, causing leading Wall Street indices like the Dow Jones to crash as many investors and traders shied away from investing and lost faith in the economy. This event triggered the Great Depression, a global economic downturn.
Black Monday (1987)
On October 19, 1987, Wall Street experienced its largest single-day crash in history, losing a staggering $500 billion due to global market downtrends. The plummet was triggered by automated selling programs, prompting the implementation of special rules to prevent similar disasters.
The Great Recession (2008)
In 2007-2008, global economies suffered a recession that significantly impacted markets worldwide, especially the housing market in the US.
People lost their life savings, incomes, and homes in what was described as the worst economic crash since the Great Depression (1929 – 1939).
The crash was attributed to mismanaged subprime mortgages and led many financial firms to file for bankruptcy.
You can read more about market crashes in our article titled “Understanding Stock Market Crashes.”
Other Important Events That Shifted Wall Street
The S&P 500’s Longest Bull Run (2009-2020)
From March 2009 through March 2020, the S&P 500, one of Wall Street’s most famous indices experienced its longest bull run driven by optimism and a booming economy. This bullish track was interrupted by the emergence of the Coronavirus pandemic in 2020.
Facebook’s Initial Public Offering (2012)
When the social media behemoth Meta (META), formerly known as Facebook, became publicly traded on May 18, 2012, ripples were sent across the trading floors of Wall Street as the company raised over $16 billion, marking the biggest tech IPO at that time.
Companies Headquartered in Wall Street (As of 2024)
Here are some of the companies that are headquartered on Wall Street as of 2024:
Wall Street Opening Hours
The New York Stock Exchange is open from Monday to Friday from 9:30 a.m. to 4 p.m. ET. However, the markets close occasionally, on weekends and holidays.
Conclusion
In conclusion, Wall Street symbolizes global finance's epicenter, originating from a 17th-century wooden defense wall, as such, familiarizing ourselves with its history and significance may be crucial to our overall understanding of the markets and the economy.
