NEW YORK -- 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.
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 Igor Lerner, left, and Dilip Patel, both specialist traders for Bear Wagner, work from their post during early activity on the floor of the New York Stock Exchange, Wednesday Dec. 31, 2008. Wall Street showed a modest advance in the final session of a dreadful year as investors took some comfort from a sharp drop.[Agencies] |
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 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.
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.