S&P 500 is at risk of hitting a new low as angst persists

NEW YORK -- Stock market bottom? Or bottomless money pit?

On Nov. 20, calls of a bottom rang out on Wall Street when investors hit the panic button, a gauge of market fear climbed to levels never seen before and stocks stopped falling after a 13-month drop of 52%.

But now, amid a deepening recession and after the worst week for stocks since the November swoon, the prior bear market lows that Wall Street hoped would act as a final price floor are in jeopardy.

Last week, the 30-stock Dow Jones industrial average closed at a fresh bear market low. That's prompting fear that broader market gauges such as the Standard & Poor's 500 also will sink to new lows and potentially set the stage for another down leg for stocks.

As is often the case when stocks appear on the brink of a major breakdown, the S&P 500's rebound Friday from a big dip that brought it within 2 points of its Nov. 20 closing low of 752.44, was viewed as a hopeful sign. But analysts say the reprieve likely will be short-lived. The benchmark index, they say, is at risk of falling further and carving out a new lower low.

"One thing we know about markets is that selling begets selling, and that is the risk," says Quincy Krosby, chief investment strategist at The Hartford.

Analysts that glean future market moves from stock chart patterns, investor sentiment measures and profit forecasts warn that the S&P 500 could fall 15% to 20% more if the lows don't hold.

Krosby says the stock market is a measure of how the nation feels about itself.

"The Dow is reflective of the national mood," she says. "Right now the mood is very pessimistic and signals a negative outlook and a lack of confidence."

The stock market is struggling again in 2009, following a 38.5% loss for the S&P 500 last year. The large-company index, which is tracked closely by professional investors, closed Friday at 770.05, down 14.7% for the year and 50.8% off its record high of 1565.15 set on Oct. 9, 2007.

Investor angst is being driven by the economic fallout from the imploding housing market and weak state of the nation's banking system. The drying up of consumer credit caused by problems at banks saddled with bad mortgage debt is creating even more downward pressure on the economy and corporate profits.