NEW YORK - US STOCKS rose modestly on Wednesday as Wall Street closed out a catastrophic year that saw key indexes post their worst annual performance since the Great Depression.

The Dow Jones Industrial Average managed a gain for the day of 108.00 points (1.25 per cent) to 8,776.39, but ended the year with a loss of 33.84 per cent, the worst since 1931.

The broad-market Standard & Poor's 500 index also suffered its most dismal annual performance in 77 years, losing 38.49 per cent in 2008, despite Wednesday's rise of 12.61 points (1.42 per cent) to 903.25.

The Nasdaq, an index created in 1971, lost 40.54 per cent on the year, its biggest yearly loss in history, after Wednesday's rise of 26.33 points (1.70 per cent) to 1,577.03.

Mr Chris Konstantinos at Riverfront Investment Group said traders opened the day with 'a sigh of relief that 2008 is about to be behind us', which may have accounted for the upbeat mood.

'While we know that it's irrational to think that one's problems such as the economic turmoil of the last 18 months will simply disappear with the start of a new year, there is something comforting about the idea of turning over a new leaf,' he added.

Ms Dendra Lambert, analyst at Hilliard Lyons, said the two-day rally to close out the year was a positive sign.

'After experiencing the worst losses since the Great Depression, some onlookers believe bargain hunters were starting to emerge in the final days of trading of 2008,' she said.

The US market's dreadful year came amid equally poorly performances worldwide with London's FTSE sliding 31.33 per cent, the Paris CAC 40 down 40.37 per cent, Japan's Nikkei losing 42.12 per cent, and Frankfurt's DAX 40.37 per cent.

In the only economic news of the day, the Labour Department said new US jobless claims fell by 94,000 in the past week to 492,000.

The drop during the Christmas holiday-shortened week came after a week that saw 586,000 new claims, the highest since 1982.

But Mr John Ryding at RDQ Economics said it would be a mistake to see the report as encouraging and predicted another weak report next week on US payrolls.

'Given that these data cover the Christmas holiday and a period of winter storms that may have prevented people from filing, we are not reading much into this decline in jobless claims,' he said.

Economists Jan Hatzius and Andrew Tilton at Goldman Sachs said the outlook remains murky in the new year.

'As 2008 turns into 2009, the uncertainty in the financial markets is unprecedented,' they said in a note to clients.

'Our forecast remains that massive fiscal and monetary stimulus will end the technical recession in the second half of 2009, setting the stage for a very sluggish recovery that keeps the unemployment rate on an upward trajectory and the federal funds rate near zero through the end of 2010. But we confess to enormous uncertainty about this outlook.'

The worst of the blue chips for the year was General Motors, the sputtering auto giant that lost 87 per cent in 2008 as it needed a government lifeline to avert collapse.

Citigroup, the former financial superstar which also needed a government bailout, lost 77 per cent for the year, while aluminum giant Alcoa plunged 69 per cent amid a collapse in the commodity markets.

The only blue chips to rise for the year were fast-food king McDonald's, up 6.0 per cent, and retail leader Wal-Mart, gaining 18 per cent.

The bond market, which saw record low yields over 2008, saw modest losses Wednesday. The 10-year Treasury was yielding 2.244 per cent compared to 2.087 per cent on Tuesday and that on the 30-year bond increased to 2.691 per cent from 2.583 per cent. Bond yields and prices move in opposite directions. -- AFP