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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Big losses cap turbulent week

By JOE BEL BRUNO and SARA LEPRO Associated Press

NEW YORK – Wall Street ended a turbulent week with another astonishing show of volatility Friday, with stocks plunging, recovering and then plunging again as investors absorbed another wave of downbeat economic news. Hedge fund selling in advance of a Saturday deadline contributed to the market’s gyrations, which set back the Dow Jones industrials almost 340 points and helped the major indexes fall sharply for the second straight week.

Some retrenchment was to be expected following a big rally Thursday, when the Dow rallied more than 550 points after falling near its lows for the year. But, there was plenty of discouraging news for investors to focus on, including comments from Federal Reserve Chairman Ben Bernanke that the markets remain under “severe strain” and a sobering report on October retail sales.

For the week, the Dow lost 4.99 percent, the S&P fell 6.20 percent and the Nasdaq tumbled 7.92 percent.

The major indexes have fallen dramatically since their highs of October 2007 as the housing and credit crises have taken their toll on the economy. The Dow is down 40 percent from its closing record of 14,164.53, while the S&P 500 is off 44.2 percent from its record close of 1,565.15. The Nasdaq is off 46.9 percent from its then 7 1/2-year high of 2,859.12.

Analysts believe the market is still searching for a bottom after last month’s huge losses, and that the pattern of volatility will continue for some time.

“Clearly, the trading crowd like hedge funds can take this market in any direction they want to. Anybody looking to build a position is just not confident,” said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co.

Friday’s session saw another stream of bad news. Bernanke said during a speech in Frankfurt, Germany, that he would work closely with other central banks to try to alleviate the global financial crisis and left open the door to a fresh interest rate cut. The Fed is scheduled to meet Dec. 16 at its last regularly scheduled meeting this year.

While Wall Street would like to see another rate cut, many investors aren’t sure, given the litany of bad economic and corporate news, of how effective a rate reduction would be in the near term. Many investors are still trying to assimilate the idea that the economy’s downturn will be protracted, lasting well into next year and perhaps longer.

The Dow Jones industrial average ended the week down down 446.50, or 4.99 percent, at 8,497.31. The Standard & Poor’s 500 index finished down 57.70, or 6.20 percent, at 873.29. The Nasdaq composite index ended the week down 130.55, or 7.92 percent, at 1,516.85.

The Russell 2000 index finished the week down 31.73, or 5.90 percent, at 505.79.

The Dow Jones Wilshire 5000 Composite Index – a free-float weighted index that measures 5,000 U.S. based companies – ended at 8,721.88, down 636.42 points, or 6.80 percent, for the week. A year ago, the index was at 14,727.28.