Downturn might send markets up

NEW YORK – Wall Street’s huge plunge this past week showed that investors had finally become vulnerable to major economic problems and the struggles of the housing and lending industries – and that they had also developed a new respect for risk that had been absent in the stock market for some time.

Worries about the housing market, available credit to finance takeovers and the overall economy – concerns that had little lasting impact on stocks in the past – finally had investors selling on Thursday and Friday.

In the often contrarian view of Wall Street, analysts feel this downturn might be just what the market needed to carry it higher.

“What we saw was a convergence of fears that created its own momentum, especially because of housing and credit tightening,” said Joseph Quinlan, chief market strategist at Bank of America. “But, I think that’s healthy, it puts a good base under the market that will help us push higher.”

Trading next week should help analysts and investors determine if this past week’s slide was the beginning of a correction, defined as a 10 percent dip for stocks. The Standard & Poor’s 500 index, the market index market professionals watch because of its broad swath of companies, only dipped 2.33 percent on Thursday, then shed 1.60 percent Friday.

But Quinlan and other investment advisers believe the market correction might be realized through drops in key sectors, such as housing and financials.