* U.S. efforts to spur economy boost optimism
* Home builders' stocks up after mortgage data, Fed move
* Nasdaq outpaces Dow, S&P helped by tech companies
* Dow up 1.3 pct, S&P 500 up 1.4 pct, Nasdaq up 1.7 pct
* For up to the minute market news, please click on
[].
(Adds weekly, monthly stats; AIG and GM; updates index
figures)
By Chuck Mikolajczak and Chris Sanders
NEW YORK, Dec 31 (Reuters) - Wall Street closed out its
worst year since the Great Depression on Wednesday after an
unstoppable credit crisis and a dreadful economic outlook left
investors questioning their faith in stock markets.
A string of financial disasters culminating in the collapse
of Lehman Brothers in the middle of the night in September
precipitated the third biggest percentage loss ever for the Dow
industrials and the broad S&P 500.
By Nov. 20, the S&P had hit an 11-year low, destroying more
than a decade of returns for many Americans and wiping out
memories of record highs reached just 13 months earlier.
"It was plain ugly out there," said Kurt Brunner, a
portfolio manager with Swarthmore Group in Philadelphia.
"All in all, it's something that I truly hope is once-in-a
lifetime thing."
Nonetheless, U.S. stocks managed to close the year on an up
note on Wednesday as fresh efforts to stem the recession from
Washington lifted equities for the second consecutive session.
For the year, the Dow fell 33.8 percent, for its bleakest
year since 1931; the S&P skidded 38.5 percent; and the Nasdaq
posted its worst year ever, with a 40.5 percent drop.
When all was said and done, the S&P 500 found itself $5.02
trillion lighter than it was last year.
The bursting of the housing bubble began a long chain of
events culminating in the worst credit crisis in a generation.
A deep mistrust grew between banks while growing doubts
among investors about the American banking model crippled
financial stocks and yanked a key pillar supporting U.S. equity
markets.
As the shortage of credit seeped into the broader economy,
unemployment rose and consumer spending dived.
Only two stocks in the Dow ended higher for the year:
Wal-Mart Stores <WMT.N> and McDonald's Inc <MCD.N>. Investors
bet discounters like Wal-Mart and inexpensive fast-food
restaurants would be the few places consumers spend scarce cash
as unemployment soared and the economy crumbled.
The biggest decliner on the Dow was General Motors <GM.N>,
which fell 87.1 percent for the year as the company was
compelled, along with other automakers, to plead for funds from
Washington in an attempt to avoid bankruptcy.
On the S&P, the biggest decliner for the year was insurer
American International Group <AIG.N>, which fell 97.3 percent
after agreeing to an $85 billion bailout from the Federal
Reserve in exchange for government control.
But the market rose on Wednesday as investors bet that
fresh initiatives from Washington will help stave off a deep
recession.
Late Tuesday, the U.S. Federal Reserve provided clarity on
its plan to reduce mortgage costs and set a goal to buy $500
billion in mortgage-backed securities by mid-2009, a move that
surprised analysts in its aggressiveness. For details, see
[]
By buying back the securities more quickly than expected,
investors hope mortgage rates will fall at a faster pace and
stimulate the beleaguered housing market.
The Dow Jones industrial average <> rose 108 points, or
1.25 percent, to 8,776.39. The Standard & Poor's 500 Index
<.SPX> gained 12.61 points, or 1.42 percent, to 903.25. The
Nasdaq Composite Index <> added 26.33 points, or 1.70
percent, to 1,577.03.
For the week, the Dow and Nasdaq rose 3.1 percent while the
S&P gained 3.5 percent. For the month, the Dow slid 0.6
percent, the S&P added 0.6 percent and Nasdaq climbed 2.7
percent.
Exxon Mobil <XOM.N> was among the top boosts to the Dow,
rising 1.6 percent to $79.83 as oil rose 14 percent to over $44
a barrel. Chevron <CVX.N> rose 0.8 percent to $73.97 while the
S&P Energy index <.GSPE> added 1.3 percent.
The Fed move came a day after lawmakers gave an additional
$6 billion to General Motors and its financing arm, GMAC, in
another effort to stabilize the auto industry and prevent
staggering job losses.
While 2008 has been a brutal year for global markets,
investors are hoping the inauguration of President-elect Barack
Obama will lay the ground for a recovery.
"There's an optimism that the new team is going to do
something," said Michael Cuggino, president and portfolio
manager of Permanent Portfolio Funds in San Francisco.
"The impact of fiscal policy will play a huge part in
determining how deep and how long the recessionary period is
and how robust the recovery period will be."
The Nasdaq was boosted on Wednesday by large-cap tech
companies that are seen as better able to withstand the
economic crisis due to large cash reserves. Qualcomm Inc
<QCOM.O>, the wireless chip maker, was up 2.6 percent to
$35.83, while BlackBerry maker Research in Motion
<RIM.TO><RIMM.O> rose 4.7 percent to $40.58.
Industrials helped lift the S&P 500, including Pall Corp
<PLL.N>, Textron <TXT.N> and Dow component Caterpillar Inc
<CAT.N>. The S&P Industrials index <> gained 2 percent.
Pall, a maker of filtration products, jumped 9.4 percent to
$28.43, while Textron surged 7.6 percent to $13.87. Heavy
equipment maker Caterpillar rose 2.3 percent to $44.67 as one
of the top performers on the Dow.
Housing was another bright spot. Interest rates on U.S.
30-year fixed-rate mortgages dropped for a ninth consecutive
week and fell to their lowest level since 1971, according to a
survey released by home funding company Freddie Mac.
[].
The drop in rates boosted demand for home loans, and U.S.
mortgage applications held at the highest level in more than
five years during the Christmas holiday week, an industry group
said on Wednesday.
The Dow Jones U.S. Home Builders index <.DJUSHB> was up 2.5
percent after the data, led by luxury home builder Toll
Brothers <TOL.N>, up 4.1 percent to $21.43.
Volume was slim on the New York Stock Exchange, where about
1.2 billion shares changed hands, far below last year's
estimated daily average of 1.90 billion. On the Nasdaq, about
1.53 billion shares traded, well below last year's daily
average of 2.17 billion.
Advancers outnumbered decliners on the NYSE by a ratio of
about 5 to 1, while on the Nasdaq about three stocks rose for
every one that fell.
(Additional reporting by Leah Schnurr; Editing by Leslie
Adler)
