Investors are preparing to close out the last three trading days of 2008 amid Wall Street's worst year since Herbert Hoover was president.
The ongoing recession and global economic shock pummeled stocks this year, with the Dow Jones industrial average slumping 36.2% thus far. That's the biggest plunge since 1931, when the Great Depression sent stocks reeling 40.6%.
The Standard & Poor's 500 index is set to record the biggest drop since its creation in 1957. The index of the United States' biggest companies is down 40.9% for the year.
With these statistics in mind, it's little wonder that investors are all too happy to close the books on 2008. Analysts are already looking toward January as a crucial period for the market as it tries to recover some of the $7.3 trillion wiped out from the Dow Jones Wilshire 5,000 index, the broadest measure of U.S. stocks.
"It is hard to gauge a recovery because there's so many things out there that are interactive with each other," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York. "Nothing is in a vacuum. Anybody who is managing money has to be on the cautious side for at least the first six months of 2009."
He said many analysts were looking past this week and focusing on next month, especially with Barack Obama set to be sworn in as president Jan. 20. There is hope that the new administration will deliver another stimulus package, which, along with December's interest rate cuts, might help quell the financial crisis.
Trading is expected to remain volatile with many market participants on the sidelines during the holiday-shortened week, but that doesn't mean investors won't be kept busy. With no Santa Claus rally last week, economic data slated for the coming days could sway the market's mood going into 2009.
Investors will be awaiting details about how retailers fared in the post-Christmas sales period, especially because consumer spending drives more than two-thirds of the U.S. economy. The main question is whether bargain prices at the malls will be enough to rescue retailers from a bleak holiday shopping season.
Meanwhile, another gauge of how consumers feel about spending money will be released Tuesday. The Conference Board will issue its December index of consumer confidence, which is expected to rise to a reading of 45.2 for this month, up slightly from 44.9 in November.
