Stocks Slide as Santa Rally Remains Elusive

Monday, Dec. 29, 2008 -- Hey Santa, did you forget something?

Investors looking for a Santa Claus rally in the final week of trading in 2008 are still waiting.

Stocks skidded as the unraveling of one of the biggest deals this year overshadowed gains in the energy sector.

The market was off session lows with an hour of trading left as violence in the Mideast put a scare into financial markets and investors continued to scamper into safe-haven Treasury debt. A volatile energy trade ended with oil finishing just above $40, with a late surge helping nudge stock indexes closer to positive.

Volume was light in this typically slow week between Christmas and New Year's.

Dow Chemical shares tumbled more than 15 percent after Kuwait decided to scrap a $17.4 billion petrochemical joint-venture deal with Dow, dealing a heavy blow to the largest U.S. chemical company, which had planned to use the proceeds to repay a large part of its $13 billion debt from the acquisition of Rohm & Haas. Dow Chemical shares led S&P 500 losers.

Retail stocks declined as early reports indicate U.S. holiday spending fell as much as 4 percent from last year, according to data from MasterCard Advisors. Talbot's and AnnTaylor were among the biggest decliners, though even Wal-Mart , the season's star, declined, while Jones Apparel surrendered gains it achieved last week after drastically cutting its credit line.

It was a sea of red on the board today but Apple was green as investors cheered its move to sell the iPhone in Wal-Mart stores. Wal-Mart celebrated the move, splashing a giant image of the iPhone across the top half of its home page. Despite the pre-Christmas rumors of a $99 price tag, the cheapest iPhone (8GB) is selling for $197. They also have a 16GB model for $297.

Hewlett-Packard shares also rose following a Barron's article that said the hardware and software company has a strong financial position that could help it gain market share during this downturn. The company's shares led Dow gainers.

Meanwhile, H-P is looking to become a player in the data-warehousing market, the New York Times reported.

Crude oil settled more than $2 a barrel higher amid worries about Mideast stability as Israeli warplanes pounded the Hamas-ruled Gaza Strip for a third consecutive day.

That sent energy stocks higher, though ExxonMobil and Chevron were well off their highs for the day.

Amid the global tumult, shares of leading financial companies fell, with Bank of America the largest drag on the Dow.

General Motors shares also slumped amid speculation on whether its financing arm would be able to raise enough capital to become a bank holding company, a status that would make it eligible for funding under the government's Troubled Asset Relief Program.

And Ford shares dropped in part on news that investor Kirk Kerkorian's Tracinda has shed its remaining stake in the Big Three automaker.

Bad news continued to trickle in Europe, especially in the banking and housing sectors.

Belgian banking and insurance group KBC expects a quarterly loss of 900 million euros ($1.28 billion) amid credit-portfolio writedowns, after Moody's Investors Service cut ratings, triggering a charge of 600 million euros and warning of a future charge of 300 million euros.

And in the real-estate sector, housing prices in England and Wales fell 8.7 percent in 2008, bringing the average price of a house to 159,900 pounds ($235,800), according to a monthly survey by property consultant Hometrack.

It was a painful year for sure, prompting many investors to wonder: Will the market bounce back in 2009? We hopped in our time machine to look for clues in the years after the 1929 crash.

This Week:

TUESDAY: Case-Shiller home-price index; consumer confidence
WEDNESDAY: Weekly mortgage applications; jobless claims; weekly crude and natural-gas inventories; Several world markets closed for New Year's Eve (U.S. is open, no early close)
THURSDAY: All U.S. financial markets closed for New Year's day
FRIDAY: ISM manufacturing index

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