As the markets ushered in the New Year, investors were ready for any inclination that the economy would rebound, following a dismal 2008. By year’s end, the Dow has lost more than 35%, while the broader markets, the S&P and the NASDAQ, each lost more than 40%.

The steep decline within the Dow marked its worse year in trading since 1931. With countless financial firms either failing or being consolidated, such as Countrywide, Bear Stearns and Washington Mutual, the financial crisis destabilized the markets for much of the year.

The markets did however, try to put a run together heading into the inauguration of President-elect Barack Obama in January, but with countless disheartening economic releases and disappointing company earnings, there was no reason for investors to risk the uncertainty of the markets’ direction.

Despite the few positive aspects, energy prices for December fell 9.3%, while gasoline prices dropped more than 25%. Furthermore, food costs declined 1.5% in the last month of the year, which marked its largest decline in food prices since February 2006.

In a month that witnessed the changing of the guard at the White House, the country will now turn to incumbent President Obama and place the responsibility of turning the current economic distress around while leading us back to prosperity, heading into the next decade and beyond.

January ended on a streak of four cumulative weeks of ending in the red. Much of the markets’ downtrend was in regards to a floundering economy and economic reports that affirmed the sentiment of the nation.

Within the housing industry, there were mixed results that came in during the month that had its effects in investors’ minds. Included was construction spending coming in better than anticipated in November, falling only 0.6%, much better than the 1.3% decline economists were expecting.

Meanwhile, non-residential construction spending increased by 0.7%, while existing home sales in December increased 6.5% despite remaining down more than 13% for 2008, its lowest rate since 1997. However, the median price for those homes plummeted a whopping 15.3%.

Negatively, pending home sales in November dropped to its lowest levels on record, with a reading of 82.3, down 4% from October’s reading of 85.7. Sales are now down 5.3% from the November reading in 2007.

Construction on new homes plummeted 15.5% during December, with the number of housing starts falling more than 33% from last year’s total. Meanwhile, applications for building permits slipped nearly 11% from November and more than 50% from this time last year.

Lastly, new home sales for December plummeted 14.7% to a seasonally adjusted rate of 331K, down from November’s reading of 388K units sold. Overall sales for 2008 were the weakest on record since 1982, posting sales of 482K units, marking a 38% decline in homes sold from 2007 totals.

Looking further into January’s economic activity, factory orders declined for a record fourth consecutive month during November, declining by 4.6%, nearly twice what economists had anticipated. Moreover, orders for non-durables slipped more than 7%.

On top of that, orders to U.S. factories for durable goods plunged by its largest amount ever, marking the fifth straight month in which orders have declined as December saw orders for big-ticket items fall 2.6%.

Industrial production plummeted 2% in December, ending the year down 1.8%. In addition, operating capacity dropped to a reading of 73.6%, down more than 7% from the average reading between 1972 and 2007.

In relation to a lag in the nation’s production, the U.S. trade deficit, which dropped to its lowest level in five years during November, narrowed to total $40.4B, a 28.7% decline from October's deficit of $56.7B. The deficit is currently running at an annual rate of $688.2B, down from the 2007 imbalance of $700.3B.

The deficit in 2007 represented the first decline after five years of record highs. However, the lack of influential data keeps sellers in the marketplace as an influx of government reports proved too much for the indices to overcome.

Moreover, additional reports showed that exports of goods and services dropped by 5.9% to $142.8B in November, the smallest level in 14 months, while imports fell by an even larger 12% to $183.2B, the lowest level in 2½ years. The decline was led by the largest-ever drop in prices for crude oil, as total petroleum imports were down 36.5% to $23.6B.

Doubly influential was government data for the month showing that the nation’s GDP contracted at a 3.8% rate for the 4Q, but better than the 5% decline economists had projected.

The GDP report also presented less favorable data that showed consumer spending was reduced by 3.5%, as spending on durable goods were down at a rate of 22.4%, while non-durable spending fell at a 7.1% rate during the 4Q.

With all areas of the economy taking massive hits in productivity, consumer confidence slipped to its lowest level ever in January to a reading of 37.7, dating back to its inception in 1967. With consumers spending less, the Present Situation index retreated from a reading of 30.2 in December, to 29.9 in January, while the Expectations index slipped from 44.2 to 43.0 in January.

To make matters worse, wholesale prices, or PPI, dropped 1.9% in December, the fifth consecutive month in which prices have decreased. The consumer price index, or CPI, fell by 0.7% in December as well, marking the third straight month of declining prices. The core CPI, which excludes food and energy prices, showed inflation remaining unchanged for the month, but up 1.8% for the year.

In the interim, wholesale inventories were reduced for the third consecutive month as supplies slipped 0.6% in November, while overall wholesale sales for businesses were down more than 7%. Additionally, business inventories were cut by 0.7% in November, its largest reduction in more than seven years, equating to a 5.1% decline in business sales for the month.

Perhaps the most significant report released for the month was the country’s unemployment report where rates exceeded 7%, making the current rate of 7.2% the highest level in more than 16 years as employers slashed 524K jobs in December. For 2008, the workforce was reduced by more than 2.6M jobs, the most since 1945 when the country lost almost 2.8M jobs.

In a separate report, Automatic Data Processing Inc. (ADP) confirmed that their data showed that the private sector relinquished more than 693K workers from their jobs during December.

Kicking off 2009, the major indices were pushed and pulled lower throughout the months’ trading sessions. With no direction or substantial signs within the economy that the recession could be easing, the markets could be in for a continued downtick in the months to come.

Heading into February, the Dow Jones Industrial average lost more than 775 points, or 8.8% during January, ending the month at 8,000.86. Meanwhile, the broader market indicators lost significant market value over the month as well. The S&P 500 index slipped more than 77 points, or 8.6%, to close out January at 825.88, while the tech-heavy NASDAQ composite index retreated by more than 100 points, or 6.4%, to finish at 1,474.42.