As U.S. stocks rallied on the final trading session of 2008, Wednesday with the Dow Jones Industrial Average striking its best last-day-of-the year performance in percent terms since 1974. The Dow Jones Industrial Average gained 108 points, or 1.25%, to end down 33.8% for the year.

Markets around the world are starting off 2009 in a celebratory mood after a dismal 2008. European shares rose sharply, bolstered by gains in the mining sector and a solid start to the year by most banking stocks.

The Dow Jones Industrial Average ending above the 9,000 mark for the first time since Nov. 5, as investors are looking forward moves by the new administration for another big stimulus package once Barack Obama is sworn into the presidency in about three weeks’ time.

The Dow Jones Industrial Average finish up 258.3 points, or 2.9%, to end at 9,034.69 or 6.1%, for the week. The S&P 500 climbed 28.55 points, or 3.2%, to 931.80, leaving the broad-market index with a weekly gain of 6.8%. The Nasdaq Composite rose 55.18 points, or 3.5%, to finish at 1,632.21, a level that left it 6.7% ahead of last Friday’s close.

Crude-oil futures rose to three-week highs, gaining nearly 4% on concerns that Russia’s cutting off natural gas to the Ukraine could impact European energy supplies. Crude for February delivery ended up $1.74, or 3.9%, to stand at $46.34 a barrel on the New York Mercantile Exchange.

The Dow has now climbed over 7% since its close on December 23 with gains in 5 of the past 6 days, and closed over the 9,000 mark for the first time since November 5^th making their best first trading day of a new year since 2003.

“Cheers to a new year and another chance for us to get it right” - Oprah Winfrey

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On Wednesday, the final trading session of 2008, stocks staged a modest rally. Asian markets also ended 2008 on a higher note, with Australia’s S&P/ASX 200 closing up 1.9%, and shares in Europe finished broadly higher too.

The Dow finished at 8776 Wednesday, up 108 or 1.25%, and the S&P was up 12.61 at 903.25, up 1.4%. The Nasdaq rose 26 points to 1577, an increase of 1.7%.

For 2008, the Dow Jones Industrial Average has slumped nearly 34%, its worst year since 1931, right in the midst of the Great Depression. The S&P down 38.5%, and the Nasdaq down 40.5%. The fourth quarter was the worst quarter for stocks since the fourth quarter of 1987.

The S&P 500’s decline was the first that exceeded 30% since the 39% plunge in 1937. The benchmark gauge for U.S. equities lost 23% in 2002 and 29.7% in 1974, losses that were followed by annual gains of 26% and 32%, respectively.

The Chicago Board Options Exchange Volatility Index (VIX) jumped 78% to 40; a level never exceeded 50 before October. Its close of 80.86 on Nov. 20 was the highest in its 19-year history.

At its lowest closing level of 2008 on Nov. 20, the S&P 500 was down 49% for the year and 52% from its Oct. 9, 2007, record of 1,565.15. The plunge came as more than $1 trillion in credit-related losses at global financial companies triggered a global recession.

As we are leaving 2008 behind, when it comes to 2009, the big question is how ugly can things get and how they’ll fair compare to recessions of the past.

The 1973-1975 recessions, the jobless rate was above 10% for 10 consecutive months; and during 1980-1982, the economy did not grow for two consecutive years.

The rebounds from those two recessions, however, were powerful, marked by strong growth for a couple of years thereafter with housing leading the way, with an average growth of 22% in the 1976-1977 period and 23% in the 1983-1984 period.

“An optimist stays up to see the New Year in. A pessimist waits to make sure the old one leaves” - Bill Vaughan

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Many people thinks that the Santa Claus rally is a result of people buying stocks in anticipation of the rise in prices during the month of January, known as the January effect, usually occurs in the week between Christmas and New Year’s Day.

There are numerous explanations for the Santa Claus Rally phenomenon, including tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week.

Since 1969, the S & P 500 index has an average gained of 1.5% in that short period encompassing the last five trading days of the year and the first two days in January.

Last year Santa took a break and looks like this year may be the same. With U.S. unemployment claims reaching their highest levels in decades, total retail sales dropped 5.5% to 8% for November and December; I guess Santa would rather be with the children than spending time in Wall Street.

The S&P 500 rose only 7.4 points in light trading to 872 on Friday, the first trading day after Christmas, but not even a Santa Claus rally could end 2008 from going into the books as the worst year for stocks since the Great Depression, thanks to the storm cause by the housing market slump and the credit crisis that finally brings us into a recession.

With just three trading days left, the S&P 500 index is on pace perhaps to match Wall Street’s second-worst year ever, 1937, when the S&P also plummeted nearly 39%.

So far in 2008, the Dow industrials have lost 35.8%; the S&P 500 is down 40.6%; and the Nasdaq Composite is down 42.3%. If Wall Street does not rally next week, 2008 could well challenge 1931, Wall Street’s worst-ever year where the S&P crashed 46%.

“Contemporary American children, if they are old enough to grasp the concept of Santa Claus by Thanksgiving, are able to see through it by December 15^th” - Roy Blount Jr.

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