On Wall Street, ‘good riddance’

NEW YORK – Stocks gained ground in light trading Wednesday, the final session of 2008, as investors took stock of the worst year for the U.S. market since 1931 and some staked out fresh positions in battered financial stocks.

“Good riddance to 2008,” said Kim Rupert, analyst at Action Economics.

Year to date, the Dow Jones industrial average has slumped more than 33 percent, the Standard & Poor’s 500 has lost 40 percent, and the Nasdaq composite is off more than 40 percent. The S&P 500 index hasn’t seen a worse year since 1931, right in the midst of the Great Depression.

Tacoma-based Russell Investments’ Russell 2000 index of smaller companies was down 37 percent in 2008.

But in the final week of the year, the market has been reclaiming a bit of ground, with the Dow moving up 3 percent, the S&P 500 adding 1.2 percent, and the Nasdaq gaining 1.6 percent.

Leading the advances among blue chips, shares of aluminum giant Alcoa Inc. rallied nearly 7 percent and shares of The Boeing Co. gained more than 4 percent.

“What we may be seeing is some early buying of prospective bottom-fishing candidates,” said Marc Pado, market strategist at Cantor Fitzgerald, referring to the practice of attempting to buy beaten-down shares at their lowest point.

However, “it doesn’t take a lot to move stocks around in this environment,” Pado said.

Markets are closed today in observance of New Year’s Day.

The heavily influential financials sector was mostly responsible for this year’s staggering losses in the market. The Financial Select Sector SPDR exchange traded fund has slumped nearly 60 percent this year, as the financial services sector was hammered by a housing crisis that almost brought the U.S. banking system to its knees.

Late Tuesday, the Federal Reserve said it will begin buying mortgage securities backed by Fannie Mae, Freddie Mac and Ginnie Mae in early January.

Also, the Financial Times reported that American International Group might ask the Fed to ease rules governing its asset disposals. The insurer might ask for bidders to be allowed to pay for more of the assets in shares, rather than cash, to increase competition, the newspaper reported.

The energy sector gained, as crude oil prices reversed earlier losses and rallied back above $44 a barrel. Oil futures have tumbled more than 60 percent this year, the biggest yearly loss since crude started futures trading in New York in 1983.

“While 2009 begins Thursday amid hopes of a better year, it is likely to be the same old story for the markets for some time to come,” Rupert said. “Although the collapse in economic activity was swift, the road to recovery isn’t likely to be as quick.”

The dollar gained some ground Wednesday after a report showed U.S. jobless claims unexpectedly fell in the latest week. But the Labor Department cited seasonal volatility, and indeed, the four-week average of claims stood at the highest level since 1982.