2010 ends with stock markets up

NEW YORK – For investors, 2010 was a 12-month tug of war between optimism and doubt. Stocks initially strengthened, the job market didn’t, and fears of economic collapse in Europe and a chilling “flash crash” left many investors almost too stunned to act.

The year ended with stock markets at their highest level since the 2008 financial crisis on signs of an improving economy. But those same signs are producing worrisome side effects: Interest rates are on the rise, gold now tops $1,400 an ounce and oil prices, poised to exceed $100 a barrel, could send pump prices to $4 a gallon.

None of that seemed possible in the spring when many investors became convinced that the economy would fall back into recession. Then starting in summer, the mood shifted.

Government reports started to show the economy was gaining some strength. Corporate profits surged. And Federal Reserve Chairman Ben Bernanke signaled that the central bank was prepared to pump hundreds of billions of dollars into the economy to stimulate demand.

By the close of trading Friday, double-dip recession fears seemed like distant memories. The Standard & Poor’s 500’s 15.1 percent gain for the year, after dividends, was 53 percent more than its average historical gain.

Whether the gains will continue into 2011 will depend in part on how quickly the unemployment rate, now at 9.8 percent, drops. That will, in turn, be driven by how likely consumers and corporations are to spend more.

Many on Wall Street are optimistic that the bull market won’t end in 2011. “All of the economic indicators are pointing to stronger growth next year,” said Peter Cardillo, chief market economist at New York-based brokerage firm Avalon Partners Inc.

Trading on Friday was quiet and marked by some of the lowest trading volume of the year. The Dow Jones Industrial average rose 7.8 points to 11,577.5. The S&P 500 fell less than a point to 1,257.64. The Nasdaq composite fell 10.1 to 2,652.87.