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Wall Street makes it official: The bear is here

July 2, 2008 |  1:44 pm

No more waiting: We’re now in a genuine bear market for the Dow Jones industrials and, for the second time this year, for the Nasdaq composite.

Zapped by another jump in oil prices, the Dow closed today at 11,215.51, down 166.75 points, or 1.5%. That left the blue-chip index off 20.8% from its record closing high of 14,164.53 reached on Oct. 9.

Polarbear The tech-heavy Nasdaq slid 53.51 points, or 2.3%, to 2,251.46, leaving it down 21.2% from its 2007 peak. The Nasdaq already had visited bear territory briefly in March, when it was off as much as 24% from its high before rebounding.

A drop of at least 20% is considered the threshold for a bear market. Many other broad-market indexes haven’t yet joined the bear fest, but they’re all close. "I'd say it's only a matter of time," said Art Hogan, veteran market analyst at Jefferies & Co. in Boston.

The Dow’s slide under the 20% threshold wasn’t a shock, given that the index has been battling to stay above it for days. But this still is a bell-ringer for investors, Hogan says. The last broad-based bear market on Wall Street was in 2000-02.

Crossing the 20%-loss line "says the market is struggling, and it’s struggling for some very credible reasons," he says.

The catalysts for today’s sell-off: the usual suspects, and a few more.

Oil rose to a fresh record high, nearing $144 a barrel. And just to stick the inflation knife deeper into financial markets, copper, too, surged to a record because of miners’ strikes in Peru. (Here's your bull market: The CRB index of 19 major commodities now is up 32% year to date.)

Meanwhile, the dollar slumped, an index of home builders’ stocks fell through its previous 2008 low, and General Motors’ shares dived 15% to a new 54-year low of $9.98 after a Merrill Lynch analyst warned that bankruptcy was "not impossible" for GM.

All of this is leading up to another potentially big day for markets on Thursday, when the government reports on June employment trends (a net loss of 60,000 jobs is expected) and the European Central Bank is expected to raise its benchmark short-term interest rate for the first time in a year, citing inflation. The ECB’s move could slam the dollar once again -- if currency traders didn’t get most of that out of their systems today.

Oh, and U.S. investors and traders will have to cram their responses to the jobs report and the ECB into a half day, because markets will close at 10 a.m. PDT in advance of the Fourth of July holiday. That could just stoke the volatility meter tomorrow.

Who’s ready for a long weekend?

Photo: Oh sure, they look cuddly enough when they're young. Don't be fooled. Polar bear cub Flocke at the Nuremberg zoo. TImm Schamberger/AFP-Getty Images