After a Horrible Year, Investors Are Looking Ahead

As Wall Street ended one of its worst years ever, investors looked to 2009 for fresh signs that the deepening recession will eventually end.

"We had an amazing amount of bad news," Christopher Sheldon of Bank of New York Wealth Management told CNBC. "I think the market looks like it's trying to look beyond what will clearly be a very difficult time in 2009."

US stocks closed higher on the last day of the year following rallies in Asia and Europe.

The US market was helped by news that initial claims for unemployment benefits dropped more than expected last week, though continuing claims hit the highest level since 1982.

Still, global markets overall ended the year with either record losses or the worst declines in decades. Russia plunged over 72 percent in 2008, ranking it among the world's worst performing markets.

Despite all the pain, investors are hoping that President-Elect Obama will enact enough stimulus measures to help pull the economy out of a recession.

"There is general optimism that the new administration will come forth with some policies that are going to help," said Peter Jankovskis, director of research at OakBrook Investments LLC in Lisle, Illinois. "There is optimism for further recovery next year and that the market will move forward."

In one bit of good news, interest rates on 30-year fixed-rate mortgages dropped for a ninth consecutive week, reaching their lowest level in 37 years, according to a survey released on Wednesday by home funding company Freddie Mac.

Interest rates on the 30-year fixed-rate mortgage averaged 5.10 percent, with an average 0.7 point, for the week ending Dec. 31, down from the previous week's 5.14 percent, according to Freddie Mac.

Video: Signs of optimism for the 2009 economy.

The Federal Reserve on Tuesday built on its effort to drive down mortgage costs, and set a goal of buying $500 billion mortgage-backed securities by mid-2009. The program is part of an ongoing government effort to wrench the United States from deep housing bust that has thrust the economy into a recession.

And on Monday, U.S. lawmakers extended an additional $6 billion package to General Motors and its financing arm, GMAC.

Markets around the world have been pummeled during the worst financial crisis in 80 years that left no industry untouched.

The U.S. casualties include the bankruptcy, acquisition or government takeover of such household names as Bear Stearns, American International Group, Washington Mutual, Merrill Lynch and Lehman Brothers.

AIG, which was rescued by the government soon after the collapse of Lehman, is prepared to ask the Federal Reserve to relax rules on its more than $60 billion disposals program to allow bidders to use a greater proportion of shares to pay for its assets, the Financial Times reported.

One stumbling block to a 2009 market recovery could be Bernard Madoff, the man regulators accuse of defrauding investors of some $50 billion. He faces a Wednesday deadline to tell regulators how much he is worth and where his money and other assets are.

The Madoff scandal, which came to light earlier this month, has added to already negative sentiment in the markets.

Scores of wealthy people, banks, universities and charities around the world say they are victims, but so far the exact amount of money lost is not known in what could be the largest fraud in history.

—Reuters contributed to this report.

© 2009 CNBC