U.S Stocks Post Worst Annual Losses Since 2008

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U.S. stocks had their worst annual performance since 2008, closing out a rocky year that tempered investors’ expectations for gains in 2016.

The Dow Jones Industrial Average, a basket of 30 stocks, lost 2.2% in 2015, while the broader S&P 500 fell 0.7%.

The S&P’s loss ended three years of double-digit gains for the index, but was far from the nearly 40% dive it took in 2008, a year of financial crisis.

The year wasn’t grim across the board. The tech-heavy Nasdaq Composite Index rose 5.7%. Netflix and Amazon.com, the top-performing stocks in the S&P 500 in percentage terms, rose 134% and 118%, respectively. The consumer discretionary sector, which includes stocks such as Starbucks and Expedia, led the S&P 500 with an 8.4% gain.

But broadly, the market struggled. While an extended slump in commodity prices helped drag the stock market into negative territory this year, six of the 10 sectors in the S&P 500 posted losses.

“I see more headwinds than I do favorable factors” next year, said Keith Bliss, senior vice president at brokerage Cuttone & Co.

New Year’s Eve trading didn’t help. On Thursday, the Dow Jones Industrial Average dropped another 1% to 17425.03. The S&P 500, which fell 0.9% to 2043.94, was up for the year as of Wednesday’s close, but Thursday’s losses pushed it into negative territory for 2015. The Nasdaq Composite fell 1.15% to 5007.41.

Markets are closed Friday for the New Year holiday.

Shares in Europe mostly performed well in 2015, but many investors had expected sharper gains. The Stoxx Europe 600 rose 6.8% this year. In Asia, the Shanghai Composite Index ended up 9.4% in a roller-coaster year in which the index plunged over 40% in late August.

© Facundo Arrizabalaga/European Pressphoto Agency

Here are some 2015 figures:

Oil prices ended lower for a second consecutive year amid a global glut of crude. The plunge in energy prices rattled both stock and bond markets.

Yet many investors’ low expectations could be fertile ground for a stock-market rally should surprisingly positive news such as much stronger economic growth or a rebound in oil prices materialize, said Kate Warne, investment strategist at Edward Jones.

“With the tone and sentiment being so negative for 2016 any positive surprise could create much better market gains,” she said.

Stocks rose early in the year, but lost much of that momentum in late August as concerns over a slowdown in China hit commodity prices and emerging markets, while uncertainty around the timing of the Federal Reserve’s first interest rate rise in nearly a decade left many investors cautious.

“We had a reality check in 2015,” said Neil Williams, group chief economist at Hermes Investment Management, saying that economists had unrealistic expectations for continued Chinese economic expansion.

Nonetheless, “China still has a dashboard of policy buttons it can press to allow global growth to breathe,” which should limit the fallout for markets in 2016, Mr. Williams said.

Leslie Josephs

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