Deep in the red for the first two months of 2009, Wall Street enters March with frayed nerves in anticipation of more weak data as investors look for any signs of an end to the horrific economic slump.
With some indices at 12-year lows, the market remains cautious about the economic outlook, despite reassuring comments in the past week from Federal Reserve Chairman Ben Bernanke suggesting the worst crisis in decades could ease this year.
The Dow Jones Industrial Average of 20 blue chips slid 4.1 per cent to end on Friday at 7,062.93, its lowest level since 1997. The broad-market Standard & Poor's 500 sank to its lowest close since December 1996, losing 4.5 per cent to 735.09.
The technology-heavy Nasdaq composite fell 4.4 per cent over the week to 1,377.84, near its lows from last November. With a bear market in full force, the Dow has dropped 19.52 per cent so far this year after a slide of over 11 per cent for February. The S&P is off 18.62 per cent in the year and the Nasdaq down 12.63 per cent.
Al Goldman at Wachovia Securities acknowledged that he was wrong in suggesting the market had established a low point in November but still held out hope for a rebound soon.
"In hindsight, our timing may have been too optimistic; the bottoming out for the bear could start somewhat lower," he said. "However, history shows that the economy and the stock market will recover."
The market got a brief lift early in the week after Bernanke suggested the recession could end in 2009 – but added that this was contingent on a series of rescues and stimulus efforts working as intended.
Investors had to cope with more grim economic news including a downward revision showing a stunning 6.2 per cent annualised drop in fourth quarter economic activity, highlighting a deepening recession.
A government plan to boost its stake in troubled banking giant Citigroup to as much as 36 per cent through a stock conversion also roiled the market and sparked further debate over whether the move was an effective nationalisation.
Sal Guatieri at BMO Capital Markets said it was unclear whether this type of action, which could be extended to other banks, would revive them or simply keep them alive as "zombie" banks.
"An ongoing concern is that the toxic assets held by 'zombie' banks on government life-support could continue to bleed value from the illiquid assets held by still-healthy banks," he said.
The coming week could bring more bad news, with February auto sales expected to be weak and a payrolls survey expected to show further massive job losses – perhaps as many as 600,000, according to some analysts.
Yet some analysts say the stock market is "oversold," having already discounted the worst economic scenario.
Gregory Drahuschak at Janney Montgomery Scott said he remains cautious.
"The biggest positive for the market presently is its deeply oversold condition," he said. "On its own, this could be enough to spawn a move in the major averages of 10 to 15 per cent from current levels. This, however, is far from assured which is why we would not suggest positioning any portfolio aggressively."
Nyse relaxes rule
The New York Stock Exchange has confirmed it is pushing ahead with a plan to relax a rule that requires shares to trade above a dollar.
The exchange said the change was warranted given the "current period of unusual market volatility and decline."
Ordinarily, an NYSE-listed company's shares cannot remain below $1 (Dh3.67) more than 30 consecutive days. If that happens, the company gets about six months to prove to the NYSE it can boost its stock price.
The NYSE has already lowered the minimum market capitalisation for listed stocks. On January 23, the exchange temporarily decreased the threshold to $15 million from $25m. The minimum market cap had been raised to $25 million from $15m in 2004.