Here's How The Market Reacted To The Attack On Pearl Harbor 75 Years Ago

The watershed event that dragged the U.S. into the World War II is the Pearl Harbor attack on December 7, 1941. Even as 75 years have gone by, the mere mention of the much-maligned event still sends shudders down the spin, evoking several unpleasant memories.

Background Of Pearl Harbor Attack

Well ahead of the event, the relations between Japan and the United States began to sour, with the latter not taking kindly to the fact that Japan was beginning to become an aggressor, conquering China in 1937 and joining hands with the Axis powers, namely Germany and Italy, which was pitched against the Allies, including the United States, France, the Soviet Union and the U.K.

The occupation of French Indochina in July 1941 was the last straw, as the United States froze Japanese assets on its shores and imposed sanctions against Japan. Even as economic relations between both nations were strained, Japan harbored the intent of conquering Southeast Asia and Indonesia and felt the U.S. Pacific Fleet stood as a stumbling block between it and its ambitions. This set the ball rolling for the attack.

The Event

The attack, made on a Sunday, commenced at 7:48 a.m. Hawaiian Time, with 353 Imperial Japanese fighter planes, bombers and torpedo planes launched from six aircraft carriers. This led to the damaging of all eight U.S. Naval battleships, although six of them were repaired and brought back to service.

Other casualties included the damaging of three cruisers, three destroyers, an anti-craft training ship and one minelayer and destruction of 188 U.S. aircraft. It also resulted in the loss of life of 2,403 Americans, with 1,178 others being wounded. In comparison, losses for the Japanese were less, with just 29 aircraft and five midget submarines damaged and 64 servicemen killed.

The fact that the attack came without any pre-warning, despite the ongoing negotiations, was something the United States could not digest and forced them to declare war on Japan the very next day. Germany and Italy jumped into the fray in support of Japan and declared war on the United States on December 11. Franklin Roosevelt, the then president of the United States, termed the day as "a date which will live in infamy."

The Markets: Aftermath Of The Attack

The Dow Jones Industrial Average fell 6.3 percent in the two days that followed the attack. From 115.9, the index fell 2.92 percent to 112.52 on Monday, the first session after the attack. It fell another 2.89 percent on Tuesday.

Despite a short recovery attempt thereafter, the index was under pressure until the U.S. Navy's victory at the battle of the Coral Sea in early May 1942, which gave confidence to the investing community that a resolution may be close at hand.

There is another perspective to the stock market performance. A report, quoting Ibbotson Associates of Chicago, said a person who bought U.S. blue chips and held them till end of 1945, when the World War II ended, would have generated returns in excess of 25 percent annually.

The recovery rebound is a telling proof of the indomitable spirit of investors, who have proved resilient enough to weather the many crises the United States has faced in the past.

Seventy-five (75) years later, in pre-market trading, the SPDR S&P 500 ETF Trust SPY was losing 0.14 percent at 221.40.