Wall Street ended a year of solid gains with a blip lower on Friday as investors made last-minute adjustments to portfolios in light holiday trading. But in spite of its uninspiring finish, the market was expected to extend its two-month-old rally into the new year.
With no new economic data and little corporate news, stocks drifted in a narrow range before dipping lower at the end of the session.
The fourth-quarter surge in stocks -- moving from 2004 lows in October to three-and-a-half-year highs over the past two weeks -- salvaged investors' returns for the year. Although the gains paled in comparison to 2003's double-digit returns, the post-election rally did push Standard & Poor's 500 and the NASDAQ composite index to high single-digit returns.
"When you look at it, it's astounding to get the kind of performance we had this year when you think about the negative effects of the bubble bursting from the '90s, the various corporate shenanigans we had, the rise in energy prices," said Joseph Battipaglia, chief investment officer at Ryan Beck & Co.
"The year's been very consistent with what we've seen in the second year of an economic recovery, and the growth we've seen is pretty good, all things considered," he said.
According to preliminary calculations, the Dow Jones industrial average fell 17.29, or 0.16 percent, to 10,783.01.
Broader stock indicators were modestly higher. The S&P 500 index was down 1.63, or 0.13 percent, at 1,211.92, and the NASDAQ lost 2.90, or 0.13 percent, to 2,175.44.
Stocks ended the week mixed in light, uneven trading, but remaining near their three-year highs. For the week, the Dow fell 0.41 percent, while the S&P rose 0.15 percent and the NASDAQ climbed 0.69 percent.
The market entered last year riding a strong wave from 2003, which saw the Dow rise 25.3 percent and the NASDAQ skyrocket 50 percent. But a mid-year economic slowdown pushed stocks lower, and the slump was exacerbated by sharply rising oil prices in the third quarter. On Oct. 25, the Dow reached its low for the year at 9,749.99 before the post-election rally took hold.
For the year, the Dow gained 3.15 percent, the S&P rose 8.99 percent and the NASDAQ was up 8.59 percent.
Those gains were fueled by a strong fourth quarter, which saw the Dow climb 6.97 percent, the S&P rise 8.73 percent and the NASDAQ gain 14.69 percent.
This year's returns were even more welcome considering the sharp rise in crude oil prices, which topped US$55 per barrel in October before falling through November and December.
Crude futures closed on Thursday at US$43.45 per barrel, down US$0.19, on the New York Mercantile Exchange, which was closed on Friday.
For the year ahead, economic growth will likely continue at a calmer pace, while the falling dollar, which does raise long-term concerns regarding inflation, could actually help decrease the US trade deficit, boosting manufacturing stocks.
"I think the key issue is going to be, has the dollar fallen enough to generate trade improvement?" said William Dudley, chief US economist for Goldman Sachs. "If the answer is no, that means the economy will be a little bit softer, and the dollar will probably weaken a little bit further. If the answer is yes, then the economy will be stronger."
Pharmaceutical stocks were one of the few areas of focus on Friday. According to media reports, Eli Lilly & Co hid reports that its popular antidepressant Prozac could cause behavioral problems.