S&P 500 flat after ‘long wild ride to nowhere’ in 2011

By Angela Moon ,Reuters

By Angela Moon NEW YORK — For the U.S. stock market, 2011 was a long wild ride to nowhere. The broad S&P 500 endured huge daily swings but a year of drama left the index almost where it started. It lost a mere 0.003 percent, closest to unchanged since 1947, according to Standard & Poor’s. Global markets have been battered this year by the eurozone debt crisis, upheaval in the Middle East, and U.S. political gridlock. Similar events probably await investors in 2012. “The earnings and fundamentals were there for companies, but the political crisis and paralysis in Washington and Europe were too much,” said Martin Sass, who founded and runs the US$7.5 billion M.D. Sass hedge fund. “They overwhelmed the fundamentals. I didn’t think the eurozone crisis would have been so protracted as it has become.” The Dow industrials gained 5.5 percent for the year as investors sought safety in large-cap, dividend-paying stocks. The Nasdaq lost 1.8 percent.

Investors took out their ire on the financials, which were the weakest group this year, falling more than 18 percent. Concerns about exposure to Europe and the threat of a renewed financial crisis hurt those shares. Bank of America Corp was the Dow’s worst performer, tumbling 58.3 percent this year, and it was also one of the S&P 500’s biggest losers. JPMorgan Chase & Co slumped 21.6 percent in 2011. Cabot Oil & Gas Corp was the only S&P component to double its stock price in 2011 – rising 100.5 percent – followed by another energy name, El Paso Corp, which rose 93.1 percent. The S&P 500 ‘s weakest stock was First Solar, as shares of that company were hit by falling solar panel prices. For the year, the stock was off 74.1 percent. Defensive sectors like utilities outperformed growth sectors, underscoring the view that investors were concerned about the economic outlook. McDonald’s Corp advanced 31 percent this year, making it the Dow’s biggest gainer. Reflecting the wild market swings, the CBOE Volatility Index, or VIX, rose about 32 percent for the year, the first increase since 2008. The S&P 500 climbed 9 percent at its peak, and dropped 14.5 percent to its bottom. One potential silver lining headed into 2012 is that after relatively flat years, the market tends to bounce. “The other times (the S&P 500) didn’t change much during the year, it performed quite well during the next year,” said Jason Goepfert, president of SentimenTrader.com in a report. “Overall, the years after these small-change years did well, especially during the past 50 years.” Of those, the next year returned a median gain of 17.8 percent, according to Goepfert’s data. The maximum loss averaged a decline of only 1.6 percent versus a maximum gain that averaged 20.9 percent. He also noted the final session of the year has not had a great run lately, being positive only 34 percent of the time during the past 30 years.