Stock Market Ticks Lower In Last Session of the Year

By SCOTT PATTERSON

THE WALL STREET JOURNAL

January 1, 2005

It wasn't the best of years. But at least it wasn't the worst.

The Dow Jones Industrial Average rose 3.2% in 2004, after rocketing 25% higher the year before. The broader Standard & Poor's 500-stock index added 9% for the year, and the tech-heavy Nasdaq Composite Index rose 8.6%. Small caps dominated: The Russell 2000 shot up 17% and the S&P SmallCap 600 surged 22%.

McDonald's was the biggest gainer on the Dow for the year, up 32%, while Merck was its top decliner, falling 28% over its Vioxx troubles.

MARKETS BOXSCORE: 2004
Dow Jones Industrial Average +3.15%
Nasdaq Composite Index +8.59%
Standard & Poor's 500 +8.99%
Russell 2000 +17%
Dollar/euro -7.3%
Dollar/yen -4.6%
Gold +5.2%
Crude oil +34%

In some corners of the market, 12 months made a huge difference. A year ago, Kmart was a dog. This year, the retailer was up 313%, and bought Sears Roebuck in the meantime. A year ago, chip maker Intel was a darling. This year, it fell 27%. A year ago, few had heard of Sirius Satellite Radio. This year the alternative radio outfit rose 142%.

Two years ago, a euro was worth $1.05. Friday it fetched $1.35.

Steel makers, which saw a burst of volatility in the final days of 2004, had a breakout year as one of the top-performing industries tracked by Dow Jones, just behind Internet stocks.

Still, crude oil was king this year, especially the latter half. A 34% spike in the price of crude kept a lid on stocks. The Dow average, after festering in flatland for most of 2004, has shot up 11% since late October -- largely due to a more-than 20% decline in the price of oil, as well as the end of the uncertainty over the presidential election.

MARKETS WRAP
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 Cast Your Vote:4 The Dow industrials ended Friday up 3.15% for the year. How will they perform in 2005?
 

Other commodities rose dramatically this year, including orange juice and coffee, which jumped 42% and 60%, respectively. Gold rose a modest 5.2%.

Why the action? China's economy went white hot, gobbling up steel, aluminum, iron, coal and, of course, oil. China is now the No. 2 consumer of oil in the world, behind the U.S. While growth in the Celestial Kingdom is slowing down some, as indicated by recent reports that China's steel consumption is dropping off, its role as a major player in global markets is undoubtedly here to stay.

And that brings us to 2005.

Most strategists expect next year to deliver moderate returns on stocks, though some recommend a shift to defensive issues in the belief that the bull run is near the end of its cycle. The first few months should tell a great deal about how the rest of the year will play out, says Phil Roth, chief technical market analyst of Miller Tabak. "The best part of 2005 comes early," he says, after which the strategist is forecasting a moderate correction.

Since 1950, the S&P 500 over the course of a year has followed the performance of the first month 91% of the time, according to the so-called "January Barometer" found in the Stock Trader's Almanac.

And as for Friday's markets? Stocks limped though the final trading session of 2004. The Dow fell 17.29 points to 10783.29. The S&P 500 declined 1.63 to 1211.92 and the Nasdaq Composite Index lost 2.9 points to 2175.44.

In major U.S. market action:

Stocks rose.5 On the Big Board, were 787.2 million stocks traded, 1,767 stocks rose and 1,488 fell. On the Nasdaq Stock Market, where 1.3 billion shares changed hands, 1,608 issues advanced and 1,504 declined.

Bonds gained.6 The 10-year Treasury note rose 9/32, or $2.81 for each $1,000 invested. The yield, which moves inversely to price, fell to 4.220%. The 30-year bond was up 20/32 to yield 4.830%.

The dollar was mixed.7 It traded at 102.70 yen, down from 103.89, while the euro fell against the dollar to $1.3546 from $1.3601.