S&P 500 flat for 2011; Dow ends up 5.5% for year

Updated 3m ago Comments

NEW YORK (AP) – Stocks are ending a tumultuous year with the S&P 500 exactly flat for 2011, while the Dow Jones industrial average gained 5.5% for the past 12 months.

The Nasdaq composite index ended in negative territory for the year, shedding 1.8% so far.

McDonald's (MCD) is shaping up to be the biggest winner in the Dow this year with a gain of 31%. Bank of America (BAC) is the worst, down 59%. On Friday Ford reported that its sales topped 2 million this year for the first time since 2007. Ford shares fell 0.1%.

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The conventional wisdom is the more risk, the greater the potential rewards. But the opposite is proving true this year: Investors playing it safe have gained the most.

The most dull and conservative of stocks — utilities — are up 16%, the largest gain of the ten sectors in the Standard & Poor's 500. Other winning groups are consumer staples and health care companies, both up 11% in 2011.

Stock trend

Dow Jones industrial average, five trading days There were no major U.S. economic reports scheduled for Friday. 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. Better news on the job market and home sales lifted stocks Thursday, pushing the Dow up 135 points.

The government said Thursday that the number of people applying for unemployment benefits each week had dropped by 10% since January and pending home sales jumped to their highest point in a year and a half.

Still, investors are waiting to see if those home purchases actually stick. A growing number of buyers cancel contracts at the last minute, making the gauge less reliable than in prior years, according to the National Association of Realtors.

Investors are also awaiting a raft of data next week that have a close link to hiring, including the ISM manufacturing numbers for December, as well as construction spending and factory orders from November. And the December employment report, due out Friday, will be closely watched by Wall Street.

Overseas, many markets are posting big declines for the year in the wake of Europe's debt crisis, a fragile U.S. economy and signs that China's economy is no longer sizzling.

Markets have also been rocked by natural disasters, trading scandals, sharp fluctuations in commodity prices, and oil price volatility amid the political turmoil in the Arab world.

In Europe, trading has been particularly grim, with many of the main markets posting their worst year since 2008. That's perhaps to be expected given that most of the financial world's attention has centered on the continent's debt crisis, which has already seen three relatively small countries bailed out and a much-bigger country, Italy, now at risk.

Trading in Europe on Friday was fairly quiet, since many markets were only open for half a day, so more than a few traders used the opportunity to close out their books for the year.

The FTSE 100 index of leading British shares closed up 0.1% at 5,572, although it was 5.6% lower for the year. Germany's DAX ended 0.9% higher at 5,898 for the day and 14.7% down for the entire year.

The CAC-40 in France, open for a full trading session, was 0.3% higher at 3,138. Despite the rise, it's still looking like it will end the year around 17% lower.

The euro is ending 2011 just below the $1.30 mark, the result of policymakers failing to convince investors that they are effectively dealing with the debt crisis. The 17-nation eurozone is widely predicted to slip back into recession next year. Still, the euro has held up pretty well in 2011, it started at $1.33 and hit a 15-month low against the dollar Thursday at $1.29.

Much of the attention in early 2012 will center on Italy, the eurozone's third-largest economy. Fears of default on Italian government bonds mean that investors are demanding ever-higher interest rates. A country can no longer borrow affordably to pay off maturing bonds winds up defaulting or needing a bailout.

Italy's debt burden already totals 1.9 trillion euros, or $2.5 trillion. In the new year, Italy has 330 billion euros or $431 billion of debt that will need to be refinanced at affordable rates. Italy's 10-year bond yield has jumped 2 percentage points this year and is dangerously close to 7%. That level is unsustainable in the long run and is the level at which Greece, Ireland and Portugal were forced to seek bailouts.

Asian markets have already closed out the year and most markets there had a year to forget. Japan's Nikkei 225 index, after three straight days of losses, managed to eke out a 0.4% rise Friday to end the year at 8,429. However, that was its lowest closing since 1982.

Meanwhile, China's benchmark index gained 1.2% to close at 2,199, a 21% loss for the year as the impact of Beijing's multibillion-dollar stimulus faded and the government tightened curbs on lending and investment to cool blistering economic growth.

Elsewhere in Asia, Hong Kong's Hang Seng Index gained 0.2% Friday to close at 18,434, a precipitous year-over-year slide of 19.7%. Singapore's Straits Times Index closed down 1% at 2,646, a 17.5% dive for 2011.

Australia's benchmark S&P ASX 200 ended the year at 4,140, down 0.4% for the day and 14.5% lower for the year. A day earlier, South Korea's benchmark Kospi closed at 1,826 on Thursday, 11% lower than a year ago.

U.S. markets are closed Monday in observance of New Year's Day.

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