The U.S. stock market in the first quarter suffered its heaviest losses in more than five years, but the surprise to many investors may be that things weren't a lot worse.
Despite the housing-centered crisis of confidence that wreaked major damage on the nation's financial system in the last three months, most key stock indexes finished the period down 10% or less.
"It was better than you might have feared," said Richard Sichel, who oversees $1.5 billion in assets as chief investment officer at Philadelphia Trust Co.
And there was plenty of fear: Amid a wrenching credit crunch and a dive in consumer confidence, "a lot of clients are asking whether it's going to be a depression," said Andy Engel, senior analyst at investment advisory firm Leuthold Group in Minneapolis.
But it seems the stock market isn't convinced that the economy is headed for even a recession, let alone something worse.
Even at their lowest levels of the quarter neither the Dow Jones industrial average nor the Standard & Poor's 500 index was down more than 20% from its 2007 record high.
Recessions typically are accompanied by bear markets, the threshold for which is considered a drop of at least 20% in stock indexes.
The Dow, which edged up 46.49 points, or 0.4%, to 12,262.89 on Monday, gave up 7.6% in the quarter and is down 13.4% from its record high set in October.
The broader S&P 500 fell 9.9% in the three months and is off 15.5% from its 2007 peak.
Other indexes were down more than 20% at their March lows but have since pared their declines.
Optimists say the market's relative resilience belies worries that the economy could be headed off a cliff.
Bob Doll, chief investment officer for equities at money management giant BlackRock Inc. in New York, contends that recent economic data, "while hardly robust, do not signal recessionary levels."
Outside of parts of the economy directly affected by housing's woes, Doll said, "we think things are somewhere between 'hanging in there' and 'OK.' "
On Monday the bullish case got help from a report on Midwest manufacturing activity in March. The Chicago branch of the National Assn. of Purchasing Management said its business barometer rose to 48.2 in March from a six-year low of 44.5 in February.
Although any figure below 50 signals contraction, the rise in the index last month exceeded analysts' expectations.
