Another steep drop in stocks to end year
Still, Dow's annual gain was a respectable 6.43%.
NEW YORK - Wall Street ended a painful year with another steep loss yesterday as investors anticipated that 2008 would bring more of the uncertainty and turbulence of 2007.
The Dow Jones industrials fell 101 points, the latest in a string of triple-digit moves that became commonplace in the just-ended year amid bad news about housing, faltering mortgages and shrinking credit. Thanks to a big first-half advance, the Dow finished 2007 with a respectable increase of 6.43 percent - not as large as the 16.29 percent jump in 2006, but a better performance than the modest loss in 2005.
The Dow's annual gain came even after it posted its worst fourth-quarter drop in 20 years, amid billion-dollar losses at the world's biggest financial firms and lower spending by consumers contending with record-high oil prices, and declining home prices.
"Considering all that's going on, the market really acted pretty well," said Todd Leone, managing director of equity trading at Cowen & Co.
It is tough to say what the primary market driver of 2008 will be, but the stock market faces a slew of threats: more adjustable-rate-mortgage resets, a still-tight credit market, and the possibility of accelerating inflation. But Leone said the fourth-quarter earnings season in January should shed light on how U.S. companies were surviving the recent slowdown and credit crunch.
There were slivers of optimism yesterday. Britain's Observer newspaper reported Sunday that Merrill Lynch & Co. Inc. was in talks over the weekend to line up capital from investors in China and the Middle East in exchange for portions of the Wall Street firm.
Merrill, like many other financial houses, has seen its portfolio lose billions of dollars in value because of misplaced bets on mortgages. And, as Citigroup Inc., UBS AG, Morgan Stanley and the Bear Stearns Cos. Inc. have done, it has turned to investors in Asia for much-needed capital - Merrill has already gotten $4.4 billion this month from a Singapore fund, which bought a 9.9 percent stake in the brokerage.
The Dow fell 101.05, or 0.76 percent, to 13,264.82. The blue-chip index remains below its Oct. 9 record high of 14,164.53, at which point it was up more than 13 percent year-to-date.
The Standard & Poor's 500 index and the technology-dominated Nasdaq composite index also declined yesterday, but both posted annual gains for the fifth straight year.
The S&P 500 index fell 10.13, or 0.69 percent, to 1,468.36, to end 2007 with a gain of 3.53 percent. It had reached a record close of 1,565.15 Oct. 9.
The Nasdaq fell 22.18, or 0.83 percent, to 2,652.28, to finish the year with a 9.81 percent gain. Despite the market's volatility, that was the best performance for the Nasdaq since 2003, but still well below its tech-boom highs.
Government bonds rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slid to 4.03 percent from 4.12 percent late Friday, and is down nearly 17 percent for the year.
The Russell 2000 index of smaller companies fell 5.73, or 0.74 percent, to 766.03. The index finished the year down 2.75 percent.