Market nosedive

CHICAGO — The stock market’s nosedive Monday abruptly ended the Dow’s brief foray into positive territory for 2009, leaving stock-watchers to ponder whether an unexpectedly strong spring rally will survive into summer.

Plenty of evidence suggests the bull market may be done, or at least out of momentum, after 14 weeks on the upswing.

The economy remains fragile, investors are increasingly worried about the prospect of rising interest rates, gas prices are climbing again, and a market correction was probably overdue.

The Dow Jones industrial average had rebounded 34 percent and the broader Standard & Poor’s 500 index 40 percent since sinking to 12-year lows on March 9. Such numbers made this the fastest-rising market after a bear-market bottom since the 1930s.


Positive signs seen
Despite Monday’s big downturn, there are an increasing number of positive signs in the economy that signal why it might be premature to bet against the market’s continuing comeback.
"People are underestimating the ability of the economy to pull itself out of this,” said Liz Ann Sonders, chief investment strategist for brokerage Charles Schwab & Co.

Widespread skepticism about the rally’s staying power is nonetheless a good thing, she said. "If everyone were euphoric, I’d be more worried.”

History appears to be on the side of current market bulls. In the four other markets since the Great Depression when the S&P fell 45 percent or more (the 2007-09 decline was 57 percent), investors recovered two-thirds of their losses within two years and 100 percent in five years, said Alan Skrainka, chief market strategist for St. Louis-based investment company Edward Jones.

"You could get a correction at any time, for any reason,” he said.


Still climbing back
One thing is certain: Investors still have a lot of ground to make up after last year’s debacle.
The S&P remains 32 percent below where it was a year ago and 41 percent below its October 2007 peak, while the Dow is off 30 percent and 39 percent, respectively, from those levels.





by the associated press