After many ups and downs, stocks end flat for 2011
December 31, 2011
NEW YORK (AP) – The stock market ended a tumultuous year right where it started.
In the final tally, despite big climbs and falls, unexpected blows and surprising triumphs, all the hullabaloo proved for naught. On Friday, the Standard & Poor’s 500 index closed at 1,257.60. That’s exactly 0.04 point below where it started the year.
“If you fell asleep January 1 and woke up today, you’d think nothing had happened,” says Jack Ablin, chief investment officer of Harris Private Bank. “But it’s been up and down all year. It’s been crazy.”
It was a year when U.S. companies were supposed to run out of ways to make big profits. But they didn’t, and in fact generated more than ever. It was a year when the U.S. lost its prized triple-A credit rating, which should have spooked buyers of its bonds. Instead investors bought more of them and made Treasurys one of the best bets of 2011. It was a year when stocks caught fire, then collapsed to near bear-market lows.
Among stocks, there were some surprising winners. Scaredy-cat investors who bought the most conservative and dullest of stocks – utilities – gained 15 percent this year, the biggest price rise of the ten industry sectors in the S&P 500. Other winning groups were consumer staples, up 11 percent, and health care companies, 10 percent.
The biggest winner in the Dow was McDonald’s Corp, up 31 percent for the year. Bank of America Corp. was the worst-performing stock, down 58 percent.
Including dividends, the S&P 500 returned 2.11 percent for 2011. That means investors lost money after inflation, which was running at 3.4 percent in the 12 months ending in November. At least they’re getting more than investors in the benchmark 10-year Treasury note, which currently pays a yield of just 1.88 percent.
Heading into the new year, stocks seem to be well-priced.
The S&P 500 is trading at 12 times its expected earnings per share for 2012 versus a more typical 15 times. In other words, they appear cheaper now. Partly based on that, many strategists, stock analysts and economists expect the index to end next year at 1,400 or more, up 10 percent or so.
The Standard & Poor’s 500 index rose 5.42 points, or 0.4 percent on Friday. The Dow Jones industrial average lost 69.48 points, or 0.6 percent, to 12,217.60. The Nasdaq composite index fell 8.59 points, or 0.3 percent, to 2,605.15 The Nasdaq is down 1.8 percent for the year.
Trading has been quiet this week with many investors away on vacation. Volume on the New York Stock Exchange has been about half of its daily average. Markets will be closed Monday in observance of New Year’s Day.
Market curiosities in 2011:
• Despite disappointing returns in 2011, the last three months of the year were impressive, which could bode well for the new year. The S&P 500 rose 11 percent. The Dow Jones industrial average climbed 1,344 points, or 12 percent. That was the largest quarterly point gain in its history.
• U.S. stocks delivered little this year, but other markets did even worse, including ones in fast-growing economies. Brazil’s Bovespa index fell 18 percent in 2011. Hong Kong’s Hang Seng dropped 20 percent. Britain’s FTSE 100 lost 5.6 percent, and Germany’s DAX 14.7 percent.
• A broad index of the Treasury market gained 9.6 percent, despite the fact that the U.S. government is now slightly less likely to repay its debt, at least according to Standard & Poor’s.