Even though the technology indexes and the S&P 500 closed the year in the green, 2005 likely brought a fair share of frustration to many investors. The gains on the benchmark S&P 500 index were quite meager at only 3%, and this performance is even more disappointing when seen in the context of record earnings, increases in dividends, and numerous stock buybacks. The Dow approached the psychologically important 11,000 point level twice this year (in March as well as in November), but the index failed at these levels and closed the year with a small loss.

Holding stocks back for much of the year were a serious of interest rate increases and most notably surging crude oil and natural gas prices. Even though energy prices receded over the last quarter, experts project they will stay comparatively high in 2006. In December, the much touted Santa Claus rally ran out of steam and the indexes pulled back modestly, as many investors chose to lock in their modest profits even before the New Year starts. While investors hope the Federal Reserve will stop raising interest rates early next year, the Fed has still not given a clear signal that it will actually do so.

Troubling the market over this past week was the bond market with the inversion of the yield curve (where two-year bonds now yield more than 10-year bonds). In the past, such an inversion has pointed to a slowing economy, at times even to a coming recession.

© HGH Associated Press

News Archive (from 9/30/2005 until 12/31/2005)