Investment Review & Preview 2007 -2008
Tuesday, January 01, 2008SUSIE GHARIB: The financial markets celebrated the start of 2008 by taking the day off. So tonight, we'll take the opportunity to examine the markets from a longer-range perspective. And we'll begin by taking a look back to where they went in the past year.
JEFF YASTINE: Susie, 2007 will certainly be remembered as the year when volatility returned to Wall Street. But here's something you may have forgotten. When stocks opened for trading last January, the big story was falling oil prices. And as the price of oil fell below $52 a barrel, the Dow Jones Industrial Average went over 12,500 for the first time. Oil prices soon turned around, but strong economic numbers ent buyers back into the market... Taking the Dow to new highs.
Then on February 27th, Wall Street got an early morning wake up call from China. A big sell-off in Shanghai shook up investors worldwide, leading to the worst day of trading in four years. The Dow stabilized just above 12,000. But stocks remained under pressure, as sub-prime lender New Century Financial neared bankruptcy.
In April, good news on housing starts, earnings and a wave of buyout deals restored investors' confidence that sent the Dow over 13,000 and made it the best month for stocks in more than three years.
In May, new highs continued to be set almost daily. And even as gasoline prices hit an all-time high, the Dow crossed 13,500. The party took a break in June, as inflation fears sent bond yields to the highest levels in five years. And later in the month, oil prices went above 70 dollars a barrel. But investors seemed unconcerned.
In July, the blue chips soared amid buyout deals involving Hilton and Alcan. And the Dow passed 14,000. But again, bad news from abroad proved the markets' undoing. A sell-off overseas on July 26th triggered the worst day for U.S. stocks since February. Then in August, news of a growing credit crunch and fears about the solvency of hedge funds added to investor fears the Federal Reserve responded by cutting the discount rate, setting off a new rally.
In early September, the market showed some weakness as oil prices surged above $80 and job creation slowed. But the Fed again came to the rescue, by cutting the Fed funds rate for the first time in four years.
By October, the Dow was again over 14,000 and the NASDAQ was well over 2700. However, prices started to teeter as oil went over $90 a barrel. While the dollar hit new lows. To counter a big drop in home sales, the Fed came through with another interest rate cut on Halloween but in November, recession fears continued to spook the market.
In December, the market first cheered the Bush Administration's mortgage-relief plan. But then sentiment went the other way. As the Fed's quarter-point rate cut was seen as too little too late. After a short Santa Claus rally trouble in Pakistan sent stock prices downward and the Dow ended the year back where it was in the spring.
