Stocks face longer bear market as more tap nest eggs

By Jennifer Ablan - Analysis

NEW YORK (Reuters) - Major U.S. stock indexes, already trapped in bear territory, face a tougher road to recovery, as more Americans crack into their nest eggs to withdraw cash to cope with rising economic pressures.

The Dow Jones industrial average and the Standard & Poor's 500, which have fallen 20 percent or more from their closing highs of last October, qualifying them as bear markets, have taken big hits from the drastic slowdown in housing and credit as well as record oil prices.

The troubles hanging over the U.S. economy and the stock market are deep enough that a sharp rally this spring and a brief summer rebound have done little to reverse the damage. For the year so far, the Dow is down 14.4 percent, the S&P 500 is off 14.7 percent and the Nasdaq Composite Index is also down 14 percent.

Even worse, stocks that have dropped to where they are seen as compelling buys get battered further by renewed fears over the stability of the banking system.

"Every time the 'long only' guys tip their toes in the water, they get whacked -- it's been absolutely tough," said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management, which manages $22 billion.

The whacking isn't going away anytime soon, however.

Baby boomers are adding another layer of anxiety for money managers looking for a sustainable stock market recovery during the year's second half. That's because boomers, born after World War II in the economic expansion between 1946 and 1964, are increasingly withdrawing funds from their defined contribution plans as the housing debacle gets worse.

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