An economy stuck in neutral. Unemployment that refused to go down. And a near financial disaster in Europe.
Despite all the negatives — and a few surprises, like the terrifying "flash crash" of the stock market in May — 2010 proved in the end to be a pretty good year for investors, especially if you were lucky enough to own shares in high-flying technology stocks, old-fashioned industrials or gold.
Stocks ended a gut-wrenching 2010 quietly Friday. The major indexes were little changed and trading volume was at one of its lowest levels of 2010 as many traders took the day off.
Despite investors' concerns, the Standard & Poor's 500 stock index and the Dow Jones Industrial Average both rose about 14 percent for the year, including dividends. The Nasdaq composite index, meanwhile, rose about 18 percent for the year after dividends.
At Friday's close, the Dow gained 7.8 points, or 0.1 percent, to 11,577.51. The S&P 500 fell 0.24 to 1,257.64. The Nasdaq composite index dipped 10.11, or 0.4 percent, to 2,652.87.
The Dow finished the year at its highest level since August 2008, before the height of the financial crisis. The S&P had its best December gain since 1991.
"In many cases, the conventional wisdom was wrong," said Byron R. Wien, a veteran market strategist at the Blackstone Group. "The market still managed to do well, and the rise in gold and other commodities was a big surprise."
The numbers hide the fact that it was a rocky year. Stocks plunged in the spring after Greece required an emergency bailout to deal with its debt crisis. That raised concerns about debt issues in other European countries, including Ireland, which needed a bailout later in the year.
The May 6 "flash crash," which sent the Dow down to a loss of nearly 1,000 points in less than a half-hour, also rattled investors. The Dow fell 14 percent from a high of 11,205.03 on April 26 to its low of 9,686.48 on July 2.
The sudden drop — which was later attributed to a fund company that used a complex computer trading program — rattled many small investors who were still avoiding stocks after the financial crisis in 2008.
"The flash crash made retail investors take a step back and say, 'Is this really just a legalized gambling arena?' " said Scott Rostan, a financial consultant for investment banks and an adjunct professor at the University of North Carolina, Chapel Hill.
A distrust of the stock market helped fuel a boom in commodities, which finished 2010 at their highest levels in years. Gold closed above $1,400 an ounce after rising throughout the year on global economic worries. Oil prices rose from a low of $70 a barrel to close the year higher than $90.
The yield on the 10-year Treasury note rose to a yearly high of just under 4 percent in April and then plunged as low as 2.38 percent in October. That contributed to a historic drop in mortgage rates that brought 30-year fixed-rate loans to a low of 4.17 percent early in November.
So why did stocks do well last year when so much seemed to be going wrong? One factor, analysts say, was the unexpected surge in corporate earnings throughout the year, helped largely by cost-cutting. Then the government pitched in: The Federal Reserve's decision in early November to pump $600 billion into the economy by buying Treasury assets, along with tax cuts passed by the lame-duck Congress in December, helped propel a year-end rally, lifting the benchmark S&P index by about 6.5 percent last month alone.
"It was a market that needed stimulus and responded miraculously," said Quincy Krosby, the chief market strategist at Prudential. "Corporate fundamentals were clearly excellent, but to get the push that the market needed to keep it going it needed more buyers."
Investors were also encouraged by improving economic reports on unemployment, retail sales and consumer confidence, which suggested that Americans were beginning to spend again. By the end of December, investors began moving money back into U.S. stock funds after selling for every week since May.
Whether the gains will continue into 2011 will depend on a better jobs market, consumers who are more confident and the ability of corporations to earn more money from higher revenue rather than cost cutting.
Many on Wall Street are optimistic that the bull market will not end this year.
"All of the economic indicators are pointing to stronger growth (this) year," said Peter Cardillo, chief market economist at New York-based brokerage firm Avalon Partners Inc.
Consumer discretionary stocks in the S&P 500 rose 26 percent last year, making them the best performers of the 10 industry groups in the index. Health care and utility stocks have been the worst performers, rising less than 1 percent for the year.
The Russell 2000 index, made up of small-cap stocks, had the best overall performance of domestic stock indexes. It returned 27.8 percent in 2010, including dividends.
Analysts expect market profits to increase by 13.4 percent in 2011, far lower than the estimated 37.8 percent gain for 2010, according to Thomson Reuters.
To make matters worse, Wall Street is brimming with optimism, which in the looking-glass world of investing can actually be a signal to sell.
"The good news has been priced in, and the potential negatives have been ignored," said Jason Hsu, chief investment officer of Research Affiliates, a money manager in Newport Beach, Calif., that oversees $70 billion in assets. "The market is going to get more nervous at these valuations."
Information from the New York Times and Associated Press contributed to this report.