NEW YORK AND LOS ANGELES — After the stock market tumbled Tuesday, some investors braced for more pain while others breathed a sigh of relief.
The Dow Jones industrials sank 297.81 points, or 3.8%, to 7,552.60 as share prices around the world sank on renewed worries about the health of the banking industry and doubts that governments can patch together a quick economic recovery.
"I have never seen investor confidence lower than it is today," said Al Goldman, chief market strategist at Wachovia Securities. "The market is saying it's very unclear how we're going to solve the toxic-asset problem in banks, and it's casting a vote that it's very uncomfortable with the stimulus program."
A number of market watchers, however, were encouraged that the blue-chip gauge closed above -- if just barely -- its five-year low of 7,552.29 set Nov. 20, suggesting that level might well remain as the nadir of the bear market that began in October 2007.
Although the broader Standard & Poor's 500 index and Nasdaq composite index fell more sharply than the Dow on Tuesday -- 4.6% and 4.2%, respectively -- the S&P 500 stayed 4.9% above its November trough and the Nasdaq finished 12% from its low.
Nonetheless, bearish analysts fear that Tuesday's decline indicates the S&P 500 and the Dow are poised to fall well into newly negative territory.
"It seems to us as if this market has every intent of retesting [its] low," said Keith Wirtz, chief investment officer at Fifth Third Asset Management in Cincinnati. "There's just too much bad news, both now and ahead of us."
If that happens, some worry, the decline could be painful.
"If we do reach the lows from November, the market could go down 5% or 10%," said Douglas Peta, an independent market strategist. "I don't think it'll just be setting a new low by one or two points and then bouncing back up."
The short-term economic outlook, Peta argues, has worsened since November. For example, job losses have surged to more than 500,000 a month.
"The stock market is beginning to fear the economy isn't going to bottom in the next six months and may not bottom in all of 2009," he said. "We've gotten a continuing drumbeat of worsening economic data."
For much of Tuesday's session, the Dow seemed to dance just above the 7,552.29 level, bouncing up whenever the index got within range of that number. The Dow then sank to 7,551.33 in the last two minutes before a few final trades managed to push it back up, preventing it from establishing a new closing low.
