US MARKET
Street Looks to '09 With Relief After Terrible '08
The last trading day of 2008 on Wall Street provided a merciful end to an abysmal year — the worst since the Great Depression, wiping out $6.9 trillion in stock market wealth. Six years of stock gains disappeared as the economy crumbled and markets crashed around the globe, shaking the confidence of professional and individual investors alike.
But the year's chaos went far beyond the stock market. Credit markets that drive lending became paralyzed, plunging the country further into recession and touching off an unprecedented rush for the safety of Treasury bills, notes and bonds. Commodities markets, usually ignored by most investors, soared on speculative buying and then collapsed when it became clear that the world economy was in trouble and that record high prices, including oil's peak above $147 a barrel, were unjustified.
By the year's end, many market analysts were predicting that 2009 would be better, but that recovery would be slow as investors, shaken by the devastation to their portfolios,
Wall Street's stats for 2008 provide evidence of how stunningly terrible the year was:
— The average price of a share listed on the New York Stock Exchange plunged 45 percent to $41.14 by the end of the year from $75.01 a year earlier.
— The Dow Jones industrial average fell 33.8 percent for the year and 38 percent from its record close of 14,165.53 in October 2007, making it the Dow's worst year since 1931, when the country was in the midst of the Great Depression.
— The Standard & Poor's 500 index, the indicator most watched by market pros, slumped 38.5 percent in 2008 and 42.3 percent from its 2007 high of 1,565.15.
— Investors lost $6.9 trillion as relentless selling reduced the value of stocks across the market. That amount, measured by the Dow Jones Wilshire 5000 Composite Index, represented 38 percent of the total value of U.S. stocks at the start of 2008.
Yet the last week of the year was almost serene.
On Wednesday, the Dow rose 108.00, or 1.25 percent, to 8,776.39.
Broader stock indicators also rose. The Standard & Poor's 500 index gained 12.61, or 1.42 percent, to 903.25. The Nasdaq composite index rose 26.33, or 1.70 percent, to 1,577.03 and ended the year down 40.5 percent. It's down 44.8 percent from its recent peak in October; the Nasdaq's record high close of 5,048.62 came in March 2000 just before the end of the dot-com boom.
Wall Street's crash in 2008 didn't come in one day like the famous 22.6 percent plunge of Oct. 26, 1987. In many ways it was more nightmarish than Black Monday because there wasn't a quick end to the selling and record volatility.
From Sept. 15 to Nov. 20, when the Dow fell to a close of 7,552.29, the depths it had reached in the bear market of 2002, the blue chips rose or fell by triple digits 41 trading days out of 49.
Relative stability returned to the market during December. But Wall Street's horrific performance has cast a new mold for modern bear markets, often defined as a decline of more than 20 percent, and made expectations for 2009 so low that any reduction in the economic bloodletting would be considered a victory.
"Everyone is so down in the dumps about everything that I do think it gives you the opportunity to have a positive surprise if maybe the economy does turn quicker," said Bill Stone, chief investment strategist at PNC Wealth Management.
Wall Street is hoping for signs of recovery by the second half of 2009, including evidence the housing market has hit bottom, increased lending by banks and a drop in unemployment accompanied by increased consumer spending.
But for the near future economists and market experts predict more bad news
But even a modest improvement in the economy, which has been in recession since last December, could help stocks extend their recent run.
"If you're standing still, walking is a pickup of speed," said
In addition, some analysts believe the market will improve because so many investors have pulled out, leaving little room for more selling.
Still, the credit markets remain nearly stagnant as banks continue to be anxious about lending.
Corporate forecasts in January could help shape investor sentiment, even as expectations are modest.
For the market to hold its advance from November he contends the calmer trading of the past month must continue and president-elect Barack Obama's plan to boost the economy with spending on infrastructure must show it is working quickly.
"The great risk is we are in a wait-and-see economy," David
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