The last time the major stock indices on Wall Street fell for three consecutive years was in the 1939-41 period when Europe was sliding into war.
With two years in a row of falling stocks since 1999, weary investors in the United States began the new year's first day of trading yesterday wondering if history was set to repeat itself. The US stock market has already endured its worst two-year period for almost a quarter of a century.
After the bursting of the dotcom and telecoms bubble started the downward trend in 2000, the Nasdaq Composite continued to tumble last year, losing 21 per cent in value, and the Dow Jones Industrial Average slumped by a further 7 per cent.
Wall Street was in cautious mood yesterday, as it absorbed the latest data on manufacturing activity which showed that it contracted again in December, although not as much as expected.
The Institute of Supply Management, formerly known as the National Association of Purchasing Management, reported that business activity rose to 48.2 in December from 44.5 in November, two points higher than analysts predicted. A reading below 50 however signifies contraction.
The report showed factories last month received the strongest flow of new orders since April 2000 and that they cranked up production as they continued to reduce inventories, lending weight to prospects that the US economy has weathered the worst of the recession that began last March.
A stock market recovery in the last quarter of last year - when the Dow regained 21.7 per cent over its post-September 11th low, the Nasdaq 37 per cent and the S&P 500 18.9 per cent - left many stocks highly priced in the opinion of analysts, suggesting room for further falls unless evidence of higher earnings emerges quickly.
The best performing sectors last year on the Dow were house construction, semiconductors, coal, advertising and casinos, and the worst were gas utilities, precious metals, fixed-line communications, drug retailers and savings and loans associations.
