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Just when things were going along swimmingly for the stock market, investors were hit by the inflation shudders.
Fears that sky-high prices for oil, copper, gold and other commodities would spread to the rest of the economy derailed a bull market that is well into its fourth year.
Even while the current upward trend is seen as growing a bit long in the tooth, it remains the third-longest in market history, going back to 1926. And profits continue to grow at double-digit rates.
Before getting the shakes, Wall Street pushed the Dow Jones industrial average within 75 points of its all-time high. It finally dawned on investors, however, that the Federal Reserve's regimen of shock therapy for the economy won't be achieved without some pain.
Perhaps foreshadowing the recent uncertainty in the markets, several of the standby stocks in Illinois and northwest Indiana, as represented by the Tribune's annual Top 100 chart, were pulled down in a strong undertow over the past year. Companies that operate on a global stage elbowed their way into top positions.
A clear majority of the 100 companies in the chart displayed profit growth in their most recent fiscal years. In fact, about a quarter of the group saw profits shrink on a per-share basis. Remarkably, only seven saw a negative return on common equity.
Chicago economist Diane Swonk says huge manufacturers are benefiting from a boom in demand on other continents.
"Exports are picking up on the heels of a weaker dollar and improvements in the Japanese and European economies," said Swonk, of Mesirow Financial. "Europe, on the other hand, is struggling to circumvent labor problems by substituting capital for labor."
Over the next two years, Swonk is looking for capital investment by businesses to expand at the fastest rate since 1997. High energy prices are encouraging businesses to become more efficient, she added.
Moving higher in recent weeks has been Boeing Co., the Chicago-based aerospace giant, which displaced Abbott Laboratories as the area's No. 1 company in market capitalization early last month. (North Chicago-based Abbott still held the top spot on March 31, the date on which the chart's rankings are based.)
Boeing has seen investors' focus shift from a fruitless and costly argument over making military tanker planes to the company's global battle for dominance in commercial jetliners.
Thanks to its wildly successful, fuel-sipping 787 Dreamliner, which is expected to enter service in 2008, Boeing has placed European archrival Airbus SAS on the defensive. Earlier this month, Airbus denied reports it is going back to the drawing board for its touted A350 jet, which critics said is in dire need of a redesign. But sources said it is certain that Airbus will need at least a costly overhaul of the plane's basic plan.
As Boeing's fortunes have soared, so has its stock, finishing last week at $84.61, up 63 percent since the beginning of 2005. Its total return for 2005 was nearly 38 percent.
Abbott, a major global competitor in health care, seemed to reap only modest gains for the latest year, and its per-share profits grew less than 5 percent. It showed a negative total return.
Leapfrogging five other companies in the chart was Archer Daniels Midland Corp., long considered a staid, unimpressive processor of soybeans.
These days, the Decatur-based food manufacturing behemoth is sharing in the world's thirst for energy, as the global leader in making ethanol for fuel.
The fiefdom of scion Duane Andreas and members of his family for decades, Archer Daniels has anointed an outsider as chief executive for the first time--and a woman at that. Patricia Woertz, 53, a former executive of Chevron Corp., took over late last month.
ADM's stock has soared in recent months; its total return in 2005 was 12.25 percent. Earnings per share more than doubled in its last fiscal year. In the process, it hurtled from 17th position on the chart to 12th. The stock ended last week at $40.20, up 80 percent since the beginning of 2005.
Although ADM proved to be the prize puppy among energy-related stocks in the Tribune chart last year, Chicago investment manager Doug Nardi is unsure about prospects for commodity-oriented companies in the months ahead. He thinks they are due for a correction.
"One of our analysts looked at oil, and found that the marginal cost of production is only $33 a barrel. With such big profit margins, more competition becomes inevitable. Prices fall back toward the mean," said Nardi, of Legg Mason investment counsel.
As for ethanol, "it is a niche product, and it's not all that difficult to ramp up production," he added.
Sharing in the boom for ethanol and agricultural commodities has been Deere & Co., its stock tied firmly to the fortunes of grain plantings across the Midwest.
The Moline-based maker of tractors and other farm equipment, however, saw its total return turn slightly negative last year. It slipped from 13th in the chart to 14th.
Outpacing Deere has been Caterpillar Inc., the Peoria-based maker of bulldozers and earthmoving gear and equipment needed for mining. It moved up from eighth position to fifth in the Tribune chart, on the back of soaring global demand. Its total return last year was nearly 21 percent.
Caterpillar stock ended last week at $72.78, up 49 percent since the beginning of 2005.
High prices for a wide gamut of commodities "have prompted a boom in exploration. Companies that provide mining equipment and engineering expertise are enjoying a surge in business," said Chicago economist Carl Tannenbaum of LaSalle Bank.
A big local winner was Tellabs, which strengthened its position in the global market for phone and networking equipment. The Naperville-based company jumped 12 spaces in the Tribune chart, to 26th from 38th. Its total return for the year was nearly 27 percent.
A former technology darling that encountered tough times was Zebra Technologies, the Vernon Hills-based maker of computerized product tracking systems. Its total return for last year was sharply negative.
Two relative newcomers to the Tribune chart, Chicago Mercantile Exchange Holdings Inc. and CBOT Holdings Inc., immediately made their way far above the middle of the pack. The Merc ranked No. 15 in market capitalization, up from 24th last year. And the Board of Trade, which went public late last year, ranked 30th.
The Merc's shares showed a total return of nearly 62 percent for last year. No similar number could be computed for the Board of Trade, which had not traded for a full 12 months.
Food companies have been among the local losers. Kraft Foods Inc. fell from second to fourth place in the Tribune chart, dogged by problems similar to those of Sara Lee Corp., which slipped to 17th from 14th. Both have seen consumer resistance to branded varieties of food eaten in the home. And both showed a negative total return for 2005.
In contrast, McDonald's Corp., the Oak Brook-based fast-food giant, saw its stock rise to a 6-year high. Its position in the Tribune chart, however, slipped to seventh from sixth. Yet it showed a total return for the year of more than 7 percent.