This was not the year for the faint-of-heart investor.
While stocks seemed to defy gravity in a romp into the record books in 1995, it was more of a white-knuckle ride as those gains were extended in 1996.In the lurches along the way, there were lessons on the value of a few well-chosen words, when the speaker was Federal Reserve Chairman Alan Greenspan.
Stocks and bonds were helped back from a frightening July sell-off when Greenspan opined that "inflation remains quiescent."
But as the year wound down, Greenspan sent shivers through markets worldwide by wondering aloud if "irrational exuberance" had pumped up stocks and bonds too high, too fast.
In that run-up, the Dow Jones industrials roared through the 6,000 mark and other broader indexes also reached uncharted heights.
The Dow industrials set records more than 40 times during the year but failed to match the 1995 feat of 69 days with record closes.
For a second straight year, there was a November to remember, with 12 records in 20 trading days this year and a rise of nearly 500 points in the Dow, surpassing the previous record one-month gain of 319 points in November 1995.
The dollar continued a recovery from the post-World War II lows reached in 1995, when it sank below 80 yen. It briefly rose above 116 Japanese yen as the year was winding down, its highest level since March 1993.
Bonds, which suffered on worries the economy was overheating early in the year, began a comeback late in the year on expectations of sustainable, noninflationary growth.
Some highlights of a turbulent year:
- As the year begins, the Dow Jones industrials average is at 5,117.12, the Standard & Poor's 500-stock index is at 615.93 and the Nasdaq composite index is at 1,052.13. The 30-year U.S. Treasury bond - a benchmark for such long-term borrowing charges as mortgage loans - is at 5.94 percent. The dollar is trading at 103.40 Japanese yen.
- Jan. 10: The Dow tumbles 97.19 to 5,032.94, its low point for this year, after House Speaker Newt Gingrich says a federal budget deal may not be reached until after the November elections.
- Jan. 31: The Federal Reserve cuts interest rates and banks lower their prime rates. Stocks rise to record heights amid expectations that more cuts are down the road.
- Feb. 20: Greenspan says that despite recent slow growth, the economy is "basically on track for sustained growth." The comments dampen hopes for further interest rates cut, sending bonds tumbling to their biggest one-day drop since May 1994.
- March 8: Dow plummets 171.24, third-worst point drop ever, on a monthly employment report of exceptionally strong jobs growth. This raises inflation worries and shoots down conventional thinking that the Fed has room for further rate cuts. Bond prices plummet in the biggest one-day decline since 1977, and yields on 30-year Treasury bonds shoot up to 6.72 percent from 6.46 percent the previous day.
- March 11: After a weekend to think over the employment shock, stocks rebound with the Dow up 110.55 points, the third-biggest point rise ever.
- May 8: At the low point of its spring slide, the Dow is off as much as 6.1 percent from its April 3 peak at 5,342.19 during trading. It then rallies to close up 53.11 at 5,474.06, setting the stage for a new surge.
- May 22: The Dow rises 41.74 to a record 5,788.00 on new hopes there is still room for interest rate relief.
- June 5: The Nasdaq composite index peaks at 1,249.15.
- July 17: Greenspan calms markets in a week when volume records are being set, saying "inflation remains quiescent." The Nasdaq composite index, which had tumbled nearly 20 percent from its June record, rises 33.13, its biggest one-day point gain ever. Bond yields retreat below 7 percent.
- Sept. 13: Friday the 13th rally pushes Dow to its first new high since May 22 and over 5,800 for the first time.
- Oct. 7: First Nasdaq record high since June 5.
- Oct. 14: Dow closes above 6,000 for first time, helped by strong earnings reports.
- Nov. 25: The Dow rises 76.03 to record 6,547.79, capping a remarkable November rally.
- Dec. 27: The Dow rises 14.23 to a record 6,560.79.