Market Closes On Worst Year Since 1931

Dow Gets 108-Point Boost On 2008's Final Day Of Trading To Bring Merciful End To Dreadful Year

(AP)  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.

"It was a feeling of flailing," said Jerry Webman, chief economist at Oppenheimer Funds Inc. "People couldn't get a grasp because there were not obvious historical precedents."

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, U.S. companies and the overall economy, remain reluctant to buy.

"I think this may be much more of a show-me market than we're used to. The market is going to be looking for some stabilization, increases in earnings, a few more positives before it begins to recover," said Webman.

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 44.8 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 Friday, 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 highest level in March 2000. The tech-heavy index peaked in the dotcom bubble.

The Russell 2000 index of smaller companies rose 16.68, or 3.46 percent, to 499.45.

The tranquility was a welcome change in a year that was rocky from the start as worries about the financial system were fed by reports that banks had suffered billions of dollars in losses on securities tied to defaulting mortgages. The forced-sale of Bear Stearns Cos. in March unnerved Wall Street, yet it still managed to right itself through the spring.

The surging price of oil and other commodities dealt another blow to the market. As a barrel of crude leaped from $112 at the beginning of May to a once-unthinkable $147.27 on July 11. With retail gasoline prices soaring above $4 a gallon, stocks fell amid fears that consumers would have to cut back their spending because of higher energy prices.

But the market again stabilized - until the September bankruptcy of one of the most venerable Wall Street investment firms, Lehman Brothers Holdings Inc., set off a panic on Wall Street and in the credit markets. Banks, fearing that other financial institutions would be unable to repay, stopped lending to each other. The market for short-term corporate debt known as commercial paper was frozen. Interest rates soared.

The only thriving part of the credit markets was government debt. Investors desperate for safety poured money into Treasury issues, particularly short-term bills. The yield on the three month bill plunged to zero, and briefly to a negative return, as investors decided no return or a slight loss was better than the losses on Wall Street or in commodities.

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.

"I have yet to see anyone who anticipates that the first half of next year is going to be rosy," said Dean Junkans, chief investment officer at Wells Fargo Private Bank.

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 Alan Levenson, chief economist at T. Rowe Price Associates Inc.

The government has helped calm markets with a $700 billion rescue of the financial sector and by agreeing to provide financing to the major U.S. automakers. The Federal Reserve slashed its benchmark interest rate to near zero to reduce borrowing costs.

Cheaper oil prices - it settled at $44.60 a barrel on Wednesday

are expected to help bolster the economy, draining less money away from consumers and businesses. The declining prices of other commodities, which have come down in response to rapidly waning demand for raw materials around the world, should also help.

In addition, some analysts believe the market will improve because so many investors have pulled out, leaving little room for more selling.

"Given the nasty carnage how much further risk is there?" said David Darst, chief investment strategist for Morgan Stanley's global wealth management group.

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.

David Kelly, chief market strategist at JPMorgan Funds, said the prospects for the market are "exceptionally uncertain."

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," Kelly said. "What Obama needs to do is turn this into a do-it-now economy, give people a reason to buy."

[tincup356]

Greed was the culprit that crashed Wall st....and its not over ..it has infected Washington and is running rampant.Till we get rid of the fools that have pretended to represent the people,,,and replace them with honest caring people that will not flirt with lobbyists.....We the people,,,,,will not have representation in Washington, and the current two party system will bring America to it''s knees.

[rhs648]

Lots of bargains put there. Lot of companies stock value has been driven down by high oil prices for two years, ready to bounce back with oil down in price. --

Posted by jowand

Hopefully people are taking advantage of cheap stock prices. Lots of money will be made as the market bounces back. Those of us who have been investing over the last six months should be proud of ourselves for picking up stock while it is on sale.

[inventagod2]

'''' .. there were voices inside, they seemed to come from other worlds .. like virtual reality, only real .. ''''

Posted by morphndol8 at 07:56 AM : Jan 01, 2009

Seek professional help, doll. it''s a great first step.

[inventagod2]

''Market Closes On Worst Year Since 1931''

Thank you, Bu$hCo.

[kesac4650]

Just more of that "the sky is falling" hype. Last year was certainly not as bad as 1979, 1987, or 2001.

[irmcvet971]

I don''''''''t blame Bush for our troubles...

I blame the entire United States; we are the ones that RE-ELECTED HIM!

If we are going to say he was the worst president, then we must also acknowledge that we were the worst voting generation.


Posted by OzarkBard at 12:03 AM

Oh that''s ridiculous!! When you look at the MOUNTAIN of LIES used by Bush, the Fear used by Bush to eek out the win in 2004, your post is not valid!! Don''t blame the American People for the disgusting actions of that lower than life piece of Human Trash. He is what he will always be, a disgusting Nazi Snake Oil Salesman!

[jowand]

Lots of bargains put there. Lot of companies stock value has been driven down by high oil prices for two years, ready to bounce back with oil down in price.

[jowand]

Google:
BENJAMIN FREEDMAN SPEAKS: A JEWISH DEFECTOR WARNS AMERICA

See the truth about whats really going

Posted by WarDogLRS

I''ve read his speech, you can''t help but here the Jewish comedian Jackie Mason''s voice on every woid. It full of opinions and anger.

[ozarkbard]

I don''t blame Bush for our troubles...

I blame the entire United States; we are the ones that RE-ELECTED HIM!

If we are going to say he was the worst president, then we must also acknowledge that we were the worst voting generation.

[flsunjnky]

I think it is sad that he failed. Look what it has done to this country.

[inventagod2]

THANK GOD

THE BU$H REGIME

FAILED!

[flsunjnky]

Well, Grouch, you have quite a handle on history, but you also have quite a handle on how to take what you want out of context and turn it into what you want others to see. Good job, and by the way, Happy New Year to ya.

[wardoglrs]

Google:
BENJAMIN FREEDMAN SPEAKS: A JEWISH DEFECTOR WARNS AMERICA

See the truth about whats really going

[sincity_q]

@txgrouch2008

First of all, if you are counting on the Democratic Party to save the nation, you might as well wish in one hand and poop in the other to see which fills up faster. Today''s political reality is that both parties are corrupt and neither have any interest in saving the people.

We need a total restocking of congress with freshmen senators and reps who are unbound to party politics and special interests.

Then... we have to forget about those industries that defected to red china and build again a new national industrial base from young, forward thinking investors. We need to build cars that don''t need gasoline, power plants that utilize new energy technologies and then... find some way to dump the rich lobbies like those controlling healthcare (health insurance) and economics (banks).

But... here on the verge of a new year, I don''t hold out a lot of hope for any of it.

How bout you?

[stinginrich]

This is yet another failure of Clinton''''s. Oh well, I am off to pray before a life sized cardboard cutout of our wonderful president at Jesus camp. Here is hoping all you ungrateful, Godless democrats find the wonderful light of George W Bush!


--------------------------------------------------------------------------------

Posted by paidGOPshill at 07:24 PM : Dec 31, 2008
+ report abuse

LOL....I loves me some good Trolling....

[sincity_q]

@txgrouch2008

I agree with much of what you are saying... I''m just not quite ready yet to roll over and die in place.

Things are bad, yes but... we are not yet crawling on our bellies.

First of all, we have to rebuild our own industrial base, forget importing everything including air from China and regain some national pride.

We have become a nation of fat consumers who forgot how to work. This has to change or... 1931 COULD happen again.

[sincity_q]

@txgrouch2008

Oh, okay. You win.

Ohhh woe is me, we''re all gonna die.

Happy?
Good. Happy new year.

[paidgopshill]

This is yet another failure of Clinton''s. Oh well, I am off to pray before a life sized cardboard cutout of our wonderful president at Jesus camp. Here is hoping all you ungrateful, Godless democrats find the wonderful light of George W Bush!

[sincity_q]

This story is a little misleading. The 1931 market was not worth but a fraction of today''s.

It works like this...

10% of $100 is $10 - but- 10% of 10 cents is but a penny.

It''s entire subjective to the total volume but... it DOES make for a good headline and the media will apply it as they see fit.

This isn''t to say that things are bad but... we aren''t quite yet in soup lines or left to wander from town to town across a dust bowl highway looking for work and shelter that doesn''t exist. The lesson is the lesson and history is history. We have to learn from the former and not become confused with the latter.

Thank you MSM for once again proving you are utterly useless.

[debinok1]

The Bush years will be remembered as the urinal years. The eight years his trickle down economy pissed on everyone.