Stocks turned in another solid year, the Dow Jones Industrial Average gaining nearly 11% and the Nasdaq doing better still. vYet for much of 2010, it didn't feel like a winning year.
Amid stumbles and scares, U.S. stocks clambered to a second straight year of gains, in which the Dow reached levels not seen since the fall of Lehman Brothers in September 2008.
"It was a pretty hard-earned 11%," said Jeffrey Palma, global equity strategist for UBS Investment Research. "It was like a roller coaster—certainly nothing like a straight line."
With one day of trading left in the year, the Dow Jones Industrial Average has gained 1,141.66 points, or 10.9%, and stands at 11569.71.
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The Standard & Poor's 500-stock index has added 142.78 points, or 12.8%, to 1257.88. The Nasdaq Composite index has risen 393.83 points, or 17.4%, to 2662.98.
The second half of the year was responsible for nearly all of the 2010 stock gains. Since hitting a closing low on July 2, the Dow has advanced 19.4%. On Thursday, the Dow slipped 15.67 points, or 0.1%.
There were several noted areas of out-performance. Small caps, as measured by the Russell 2000 index, jumped 26% (also see "Small Cap Meant Big Rise This Year", The Wall Street Journal, December 31, C1). Real estate investment trusts also rose, with the Dow Jones Equity All REIT index surging 23.2%. Tech favorites Apple, Netflix and F5 Networks catapulted up by 53.6%, 226.4% and 150% respectively.
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Industrial behemoth Caterpillar, with its ties to commodities and emerging markets, notched a 64.7% gain, making it the best-performing Dow component. And Ford, which more than quadrupled in 2009, continued to rise, posting a gain of 66.9% amid optimism about the economic recovery.
In the spring, markets fell as the European debt crisis flared out of Greece, chatter about Chinese monetary tightening grew, and U.S. economic data came in weak.
Then a technical snafu in the afternoon of May 6 sent U.S. markets careening. At its afternoon low, the Dow plummeted 998.50 points, its biggest intraday point drop ever, before quickly reversing course. Several stocks inexplicably fell to one cent a share. What came to be known as the "flash crash" rattled confidence and turned a harsh spotlight on the growing influence of algorithmic and high-frequency traders.
Stock investors looked ready to throw in the towel. On July 2, the Dow tumbled to a close of 9686.48, some 13.6% below its April 26 high. Investors began to move to the safety of U.S.