Post by Bozur on Jan 1, 2009 0:59:11 GMT -5
Dow Posts Worst Year Since 1931
online.wsj.com — The Dow gained 1.3% in 2008's final session, closing one of the stock market's worst years on a sunny note. Blue chips fell 34% for the year, the S&P 500 plummeted 39% and the Nasdaq was off 41%. Oil prices jumped. More… (Business & Finance)
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* TODAY'S MARKETS
* DECEMBER 31, 2008, 8:42 P.M. ET
Dow Gains 108 Points, Capping Dismal Year
Blue Chips Sink 34% for 2008 in Worst Performance Since 1931
A year of market misery for the history books ended on an improbably sunny note as stocks posted a second straight round of broad-based gains Wednesday.
The Dow Jones Industrial Average climbed 108 points, or 1.3%, to 8776.39. The blue-chip measure is up 3.4% over its two-day winning streak but ended 2008 down 33.8%, its worst annual performance since 1931, when the Great Depression was in full swing.
A round of better-than-expected unemployment data and improving credit conditions helped boost the mood of the market participants who stuck around Wednesday, while many others remained on vacation or on the sidelines by choice. Volume was light, as it has been throughout the last few holiday-shortened weeks.
Oil futures jumped $5.57 to $44.60 a barrel in New York despite government data showing a rise in U.S. inventories of crude due to a slowdown in refinery utilization. The commodity plummeted 54% on the year, snapping a six-year bull run. The decline was also the worst showing in more than two decades of oil-futures trading on the New York Mercantile Exchange.
Heading into 2009, Wall Street veterans are divided over whether the stock market can continue on a less volatile path and avoid returning to its lows. There is widespread consensus that the economy will continue to show signs of pain, but the question of whether the market can sustain its recent gains in anticipation of better times to come is trickier.
Ned Riley, chief executive of Riley Asset Management in Marshfield, Mass., said he expects volatility to return as hedge-fund traders come back from their holiday vacations.
"It seems that many of these guys have essentially taken the month of December off," said Mr. Riley. "But when they're back, you could get back into that pattern of having 450-point Dow moves in a span of 20 minutes," the sort of wild swings that characterized the market's swoon this fall.
On Wednesday, however, the market enjoyed a rally that spread through all sectors. The S&P 500 rose 1.4% to 903.25, led by a 3.5% gain in its financial sector. Even the S&P's weakest category, health care, was up 0.9% on Wednesday. For the full year, the broad measure plummeted 38.5%.
The technology-heavy Nasdaq Composite Index climbed 1.7% to 1577.03, off 40.5% for the year. The small-stock Russell 2000 jumped 3.5% to 499.44, off 34.8% for the year.
About 1.3 billion shares changed hands on the New York Stock Exchange floor, slightly below the daily average for 2008. Advancers outnumbered decliners by more than five to one.
The Labor Department announced that new claims for unemployment benefits dropped significantly last week. Initial claims for jobless benefits fell by 94,000 to a seasonally adjusted 492,000 in the week ended Dec. 27 from an unrevised 586,000 the week before. Economists had expected new claims would drop by 11,000. But the number of continuing claims, those drawn by workers collecting benefits for more than one week in the week ended Dec. 20, surged by 140,000 to 4,506,000. The weekly claims report usually comes out on Thursdays, but the latest was released a day early because of the New Year's Day holiday.
The cost of borrowing longer-term U.S. dollars in the interbank market fell Wednesday, although market activity remained extremely limited on the last business day of 2008. Data from the British Bankers' Association showed three-month U.S. dollar Libor dropped to 1.425%, the lowest rate since June 2004, from Tuesday's fixing of 1.435%.
Treasury prices sank in an abbreviated session that ended at 2 p.m. Eastern. The two-year note fell 3/32 to yield 0.768%. The 10-year note shed 1-18/32 to yield 2.219%. The 30-year bond fell 3-4/32 to yield 2.67%.
The mortgage market showed further signs of easing on Wednesday. The average rate on 30-year fixed-rate mortgages fell for the ninth week in a row, setting a third-straight record low, according to Freddie Mac's weekly survey of rates.
The Mortgage Bankers Association said the volume of residential mortgage applications filed last week was essentially unchanged, hovering at a five-year high. And the Federal Reserve announced it will spend $500 billion on mortgage instruments in the coming months to help drive down borrowing costs.
Despite generally favorable developments regarding jobs and credit on Wednesday, Michael T. Darda, chief economist at MKM Partners in Greenwich, Conn., remained circumspect in his long-term outlook in a year-end note to clients on Wednesday. "These 'positives' probably say more about a modest recovery taking shape in 2010 (or at best late 2009) than they do about the first half of 2009, which is likely to be bumpy," he wrote.
The dollar strengthened against major rivals Wednesday. One euro cost $1.3961, down from $1.4074 late Tuesday. One dollar fetched 90.79 Japanese yen, up from 90.30 yen.
Other commodity prices strengthened Wednesday. The broad Dow Jones-AIG Commodity Index was up 3.3%. Gold futures rose 1.7%, or $14.30, to $883.60 per ounce in New York, up 5.8% on the year. The rally was the metal's eighth consecutive full-year gain.
Among stocks to watch, Dell shares were up 0.1% after the computer maker announced a management shake-up early Wednesday.
Major U.S. exchanges will be closed Thursday in observance of New Year's Day.
—Brian Baskin contributed to this article.
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