- The Washington Times - Friday, December 31, 2004

NEW YORK (AP) — Wall Street ended a year of solid gains with a blip lower yesterday as investors made last-minute adjustments to portfolios in light holiday trading. But in spite of its uninspiring finish, the market was expected to extend its two-month-old rally into the new year.

With no new economic data and little corporate news, stocks drifted in a narrow range before dipping lower at the end of the session.

Wall Street’s latest rally — moving from 2004 lows in October to 31/2-year highs over the past two weeks — salvaged investors’ returns for the year. Although the gains paled in comparison to 2003’s double-digit returns, the post-election rally did push the Standard & Poor’s 500 and the Nasdaq composite index to high single-digit returns.

“It’s astounding to get the kind of performance we had this year when you think about the negative effects of the bubble bursting from the ‘90s, the various corporate shenanigans we had, the rise in energy prices,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “The year’s been very consistent with what we’ve seen in the second year of an economic recovery, and the growth we’ve seen is pretty good, all things considered.”

The Dow Jones industrial average fell 17.29, or 0.16 percent, to 10,783.01 yesterday.

Broader stock indicators were modestly higher. The S&P; 500 index was down 1.63, or 0.13 percent, at 1,211.92, and the Nasdaq lost 2.90, or 0.13 percent, to 2,175.44.

Stocks ended the week mixed in light, uneven trading, but remaining near their 31/2-year highs. For the week, the Dow fell 0.41 percent, while the S&P; rose 0.15 percent and the Nasdaq climbed 0.69 percent.

The market entered 2004 riding a strong wave from the previous year, which saw the Dow rise 25.3 percent and the Nasdaq skyrocket 50 percent. But a mid-year economic slowdown pushed stocks lower, and the slump was exacerbated by sharply rising oil prices in the third quarter.

On Oct. 25, the Dow reached its low for the year at 9,749.99 before the post-election rally took hold.

For the year, the Dow gained 3.15 percent; the S&P; rose 8.99 percent; and the Nasdaq was up 8.59 percent. Those returns, though modest by the standards of 2003 and the dot-com bubble, are more representative of a typical bull market year.

Furthermore, the gains show that the market continues its recovery from its October 2002 bear market lows, when the Dow fell to 7,286.27; the S&P; 500 was at 776.76; and the Nasdaq dropped to 1,114.11.

The year’s gains were fueled by a strong fourth quarter, which saw the Dow climb 6.97 percent, the S&P; rise 8.73 percent and the Nasdaq gain 14.69 percent.

The 2004 returns were even more welcome considering the sharp rise in crude oil prices, which topped $55 per barrel in October before falling through November and December. Crude futures closed Thursday at $43.45 per barrel, down 19 cents, on the New York Mercantile Exchange, which was closed yesterday.

For the year ahead, economic growth likely will continue at a calmer pace, while the falling dollar, which raises long-term concern over inflation, could actually help decrease the nation’s trade deficit, boosting manufacturing stocks.

“I think the key issue is going to be, has the dollar fallen enough to generate trade improvement?” William Dudley, chief U.S. economist for Goldman Sachs said.

“If the answer is no, that means that the economy will be a little bit softer, and the dollar will probably weaken a little bit further. If the answer is yes, then the economy will be stronger.”

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