Stocks End First Half With a Whimper

Stocks ended mixed Monday, capping a dismal quarter and first half marked by rocketing oil prices and battered financials.

The Dow industrials and S&P 500 finished the session slightly higher, while the Nasdaq shed 1 percent. The Dow ended just 20 points shy of bear-market territory.

Major U.S. Indexes In The First Half of 2008

	Last	MTD % Change	QTD % Change	YTD % Change
Dow	11350.01	-10.19%	-7.44%	-14.44%
NASDAQ	2292.98	-9.10%	0.61%	-13.55%
S&P 500	1280.00	-8.60%	-3.23%	-12.83%
Russell 2000	689.70	-7.83%	0.25%	-9.96%
CBOE VIX	23.98	34.49%	-6.36%	6.58%

After breaking through its March low last week, the Dow has been unable to commit to bear-market territory, capitulation or a rebound, and trading volume has been thin. The whole market is in a kind of limbo: While major indexes revisit March lows, small- and mid-cap stocks are well off their March lows, and in fact, finished the quarter higher.

What's keeping the market from completely throwing in the towel?

"It wasn't that long ago that we went through a very bad market," said Nadav Baum, managing director of investments at BPU Investment Group, referring to the market boom of the late 90s and the bust that followed in 2000. "That's why people aren't too freaked out," he said. "They figure - 'Hey, I just went through it. I held on and I did pretty good ... how much worse can it get this time?'"

"I think the other thing is that people realize that this oil thing is going to come down -- there's probably $30 or $40 worth of speculation" in the per-barrel price, Baum said. "How does something go from $40 to $150 in two years and not come back down?"

Oil ended the quarter at $140 a barrel -- that's a 38 percent gain in this quarter alone, and a whopping 46-percent jump for the first half. .

"I think oil will settle between $85 and $100 a barrel and be there for a while," Baum said.

June marked the worst one-month drops for the Dow and S&P since September 2002, with the Dow off more than 10 percent for the month and the S&P down more than 9 percent.

(How do you keep your money safe in volatile market? Click on the video at left.)

For the quarter, the Dow shed 7.5 percent, and the S&P lost 3.2 percent, while the Nasdaq gained 1.1 percent. The S&P mid-cap index and Russell 2000 gained 5.4 percent and 1.7 percent, respectively, which is what helped the S&P post a smaller loss than the Dow.

The was the Dow's third straight quarterly decline, the first time that's happened since the late 1970s.

"I think that the market is in a secular bear market," Steven Lehman, a fund manager for Federated Market Opportunity Fund, told CNBC. "This was not a normal cycle –- It was a Golden Era built mainly on debt ... the Golden Era is over but the debt remains," Lehman said.

"Economic and earnings disappointments lie ahead at a time when equity valuations are very high," Lehman said.

Lehman is currently long on gold and short technology and emerging markets.

"I think technology analysts and strategists in general have been much too optimistic about technology-sector earnings and growth prospects, particularly in the international operations," Lehman explained. "We think that the tech sector has quite a bit further to fall."

Indeed, tech stocks were among the day's worst performers, with the tech-heavy Nasdaq down 1 percent from Friday's close. Yahoo , Apple and ADRs of Research In Motion all declined.

Financials were down 2.1 percent, making them the biggest decliner among 10 key S&P sector indexes. The sector has lost an astounding 31 percent since the year began.

Lehman Brothers shed 11 percent during the session to close at  $19.81, an eight-year low and 70 percent below where it started the year.

Richard Bove, an analyst with Ladenburg Thalmann, said Merrill Lynch may be forced to raise equity in the third quarter and sell a $1 billion stake in Bloomberg.

Bove also cut his 2008 and 2009 earnings estimates for Morgan Stanley .

The Worst of the First Half

Financials accounted for three of the top five Dow decliners for the first half, including AIG , which is off 55 percent, Citigroup , which fell 43 percent and Bank of America , which is off 42 percent.

Rounding out the top five Dow decliners of the first half were General Motors , off 54 percent, and Merck , down 35 percent.

GM shares are now trading at a more than 50-year low. June U.S. sales reports from major auto makers are due out on Tuesday and analysts say this could be one for the history books: It may be the month that Toyota eclipses GM as the leader in U.S. auto sales.

MBIA