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Bear market one of modern history's worst

No end in sight as meltdown erases more than $7 trillion

By ASSOCIATED PRESS | Friday, October 10, 2008

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CHICAGO

The bear market that is ravaging investor portfolios is now one of the worst in modern U.S. history and has wiped out more than $7 trillion in shareholder value, with no bottom clearly in sight.

When it stops and how far it drops, no one can predict with any accuracy - a painful uncertainty underscored by Wall Street's giddy mood at the moment the steep descent began.

A year ago Thursday, Wall Street was celebrating the fifth anniversary of a bull market that had created $10 trillion in shareholder wealth since 2002. The Dow Jones Industrial Average and the Standard & Poor's 500 Index hit record highs on Oct. 9, 2007.

A headline in USA Today captured the prevailing sentiment: "Market's run could keep going for a while."

In fact, the party was over. The subprime mortgage problem that was laid bare by a decline in home values developed into a much broader credit crisis that toppled giant banks and financial institutions.

Panicked investors have been fleeing from stocks. The Dow Jones Industrial Average fell 678.91 Thursday, or 7.33 percent, to 8,579.19. The Standard & Poor's 500 Index fell 75.02, or 7.62 percent, to 909.92. The Nasdaq Composite Index fell 95.21, or 5.47 percent, to 1,645.12.

Most experts don't see a recovery until there's greater stability in the housing market, banks are lending freely and employment improves.

Unlike other periods that saw precipitous drops, this one is rooted in foundering credit markets. That makes predictions more difficult than if the plunge were based on company profits or stocks alone.

"When you have an environment like this where the crisis is so deeply rooted from the credit standpoint, it adds an extra layer of ambiguity and ultimately of uncertainty," said Mark Freeman, portfolio manager for Westwood Holdings Group Inc. "That is what the markets are struggling with."