Stocks reflect gloomy economy in first quarter

U.S. stocks closed out the first quarter Monday with their poorest performance in more than five years, and market watchers warned that things likely will get even worse before they get better.

The litany of factors that weighed down the markets in the first three months of 2008 reads like a Greatest Hits of Economic Gloom: housing slump, credit crunch, sliding dollar, inflation fears, soaring energy prices and a recession that, depending on whom you ask, either is looming or already has settled in for a good long stay.

"We're looking at the bursting of the biggest credit bubble in the history of the United States," said George Feiger, chief executive of Contango Capital Advisors in Berkeley, Calif.

Stocks have been whipsawed as investors struggle to determine how exposed they are to the billions of dollars in mortgage-backed bonds and other dubious debt that flowed through the global financial system the past few years.

The Standard & Poor's 500 sank nearly 10 percent this past quarter. It was the index's biggest drop since the third quarter of 2002, when stocks were heading toward the bottom of a bear market after the 2000-01 bursting of the technology dot-com bubble.