NEW YORK — The Dow Jones industrial average came as close as possible to a bear market in the second quarter without actually falling into one.
Pounded in the last six weeks by the noxious mixture of rising oil prices, falling home values and continued losses in the banking sector, the Dow and the broader Standard & Poor's 500 index concluded the quarter with tepid gains Monday.
But the Dow finished down 7.4% from March 31 -- and down 19.9% from the blue-chip gauge's record high set in October.
Though the Dow and other major averages so far have averted the 20% drop that historically has defined a bear market, many on Wall Street are convinced that a bear is underway and that it may be a particularly bruising one given the tangle of problems afflicting the economy.
"The average bear market takes us down 30%," said Peter Boockvar, equity strategist at New York brokerage house Miller Tabak & Co. "If that's just the average, we have a way to go. And if you believe this is the worst economic environment in decades, you can even make the argument that maybe we're only halfway there."
The April-to-June quarter started on an up note for the stock market after the 11th-hour fire sale of Bear Stearns Cos. in mid-March raised hope that the global financial system had withstood its biggest threat in decades.
But after climbing for the first half of the quarter, stocks gave way in mid-May to a more prosaic concern -- that a weakening economy could cause long-resilient consumers to wilt under the pressure of soaring gas and food prices.
The fear now is that the economy is caught in a circular loop in which falling real estate prices cause more losses for banks, which continue to rein in lending, which keeps the economy from righting itself.
Financial stocks were pummeled during the second quarter as massive write-offs spread from major banks to regional ones that finance scores of local economies.
The travails of Wall Street were most visible in the shares of Lehman Bros. Holdings Inc., which has battled speculation that it may have to find a buyer because of fallout from the sub-prime mortgage crisis. Its shares skidded 11% on Monday.
The result on Wall Street is a grim acknowledgment that an assortment of ailments -- including the home-loan meltdown and the credit crunch -- are far more intractable than even pessimists had once thought.
