U.S. stocks seen ending 2008 higher despite credit crisis

By Jennifer Ablan

NEW YORK (Reuters) - U.S. share prices will struggle during the first half of the year as they work to overcome strains from the credit crisis but will enjoy ample gains in the remainder of 2008, according to the latest Reuters poll of investors and strategists.

Attractive valuations and drastic measures by the Federal Reserve are expected to help stocks stage a rally, according to the poll of 22 money managers and strategists which was conducted last week.

The forecasts were taken before JPMorgan Chase bought ailing investment bank Bear Stearns at the weekend and the U.S. Federal Reserve extended lending directly to securities firms for the first time since the Great Depression.

The poll participants gave a median end-2008 forecast of 1,500 points for the Standard & Poor's 500 index .SPX, a gain of 17.5 percent from Monday's close of 1,276.60.

That closing forecast, however, compares with a forecast of 1,613 given in the previous poll taken in December.

Friday's emergency rescue of Bear Stearns sent shockwaves through world markets.

Already, the Fed has slashed its benchmark rate by 2.25 percentage points since September to 3 percent, and is expected to cut rates again at its policy-setting meeting later on Tuesday. Many of the U.S. primary dealers now see policy makers lowering the federal funds rate by 1 percentage point.

Major indexes plunged on the Bear Stearns news, extending losses for the year. The S&P is down more than 13 percent, while the Dow Jones industrials index .DJI is down nearly 10 percent.