Wall Street staged a mild retreat today, quietly closing a year that will be remembered for the stock market’s great comeback – a year-end rally that pushed the Dow Jones industrials past 12,000 for the first time.
By all accounts, 2006 ended up a very good year for stocks as bullish investors bounced back from a slumping housing market and the Federal Reserve’s two-year campaign of interest rate hikes.
The markets approached record levels in the spring, pulled back sharply in the summer, but found a clear direction in the autumn to send the major indexes to multi-year highs.
Blue chips were the outstanding feature of 2006. The Dow Jones industrial average, the index of 30 of the US’s biggest companies, hit record levels dozens of times since achieving its first close above 12,000 on October 19; it traded as high as 12,529.87 before dipping to its close for the year.
This was the best year for the stock market since 2003, when Wall Street staged a massive recovery from levels sideswiped by a bear market. But 2006 will really be remembered for the market’s soaring to heights not seen since the height of the dot-com era – this time, however, Wall Street advanced cautiously, not recklessly.
The rally was fed by investors’ growing belief that the US economy has withstood well the Fed’s rate hikes and the impact of record high oil prices. And some analysts expect the advance to continue.
“The stock market is correct in its judgment that we are probably only in the fifth or sixth inning of the game, and that this (economic) expansion may even go into extra innings,” said Stuart Schweitzer, global markets strategist for JPMorgan Asset & Wealth Management. “This was a barn-burner of a year, and I expect reasonably solid results over the course of 2007.”
The Dow fell 38.37, or 0.31%, to 12,463.15 today.
Broader stock indicators also slipped. The Standard & Poor’s 500 index fell 6.43, or 0.45%, to 1,418.30, and the Nasdaq composite index closed down 10.28, or 0.42%, at 2,415.29.