NEW YORK — Rocky start. Second-half rebound. A gain for the year. That sums up Wall Street's 2008 stock market call back in January.

The first part of that prediction has been dead-on. The Dow is down 15.4 percent this year, 20.8 percent below its October record high and, as of Wednesday, officially in its first bear market in almost six years.

But the comeback call is looking like a long shot.

Many stock pundits are backing off their call of a sizable rally in the final six months of the year. Finishing 2008 with a gain may be too much to expect. "We will be lucky if we get back to even," says Jason Trennert, founder of Strategas Research Partners. In January, Trennert was the most bullish strategist polled by USA Today, predicting a full-year market gain of 14 percent. The Dow would have to rise more than 18 percent from current levels to avoid its first losing year since 2002.

What went wrong?

Wall Street's upbeat outlook was upended largely by gushing oil prices. At the start of 2008 few, if any, analysts plugged $140 oil into their spreadsheets. The 50 percent spike in oil this year to a record $143.57 a barrel — which Trennert says amounts to an "exogenous shock" — has deepened the economic gloom in the U.S. and delayed an expected recovery.

Increasingly, as oil goes, so goes the stock market.

If oil shoots up to $170 per barrel this summer, as OPEC warned, or hits the $200 target of investment bank Goldman Sachs, stocks are in for a rough ride. The Dow is already trading at nearly a two-year low.

"A prerequisite to having a better market is to have a major crack in oil prices," Trennert says.

But the unexpected and unprecedented rise in energy prices is not the only headwind causing major headaches for investors.

Wall Street was betting that other big negatives such as the credit crisis, housing slump and slowing economy that hampered stocks last year would be fading from view by now, paving the way for a brighter future. But it hasn't worked out that way — at least not yet.

Indeed, it can be argued that all of these headwinds are causing as much uncertainty now as they were three or even six months ago.

"Investor confidence has been jilted," says David Chalupnik, head of equities for First American Funds.

Jilted indeed. By now, the massive interest rate cuts by the Federal Reserve, which began in September and lowered short-term rates to 2 percent from 5.25 percent, were supposed to have jump-started the economy. But skyrocketing energy prices have offset much of the Fed's work.

"Recession fears have not lessened, they have increased," says Chalupnik, adding that the Fed rate cuts have fueled inflation in commodities. The sharp jump in prices on everything from gasoline to corn to meat is making it even more difficult for American families to make ends meet. Due to that squeeze, consumer confidence has dropped to levels not seen since the 1970s.

CREDIT PROBLEMS LINGER

The credit crisis also has stuck around much longer than expected. The seeds of the financial crisis, which first surfaced last summer and appeared to hit a crescendo in mid-March when investment bank Bear Stearns nearly imploded under the weight of losses tied to bad mortgages and a resulting 1930s-style run on the bank, are still sowing uncertainty.

By this time, investors had hoped that banks exposed to bad loans would have accounted for all their losses. But the full extent of the losses is still unknown. Investors are bracing for more bad news when U.S. banks release their second-quarter profit reports in the coming weeks. Despite already writing down hundreds of billions of dollars in losses, analysts say banks and brokerages are expected to report more sizable losses.

"We still don't know what inning we are in (in the credit crisis)," Trennert says. "By now, you would have thought the ninth inning would be wrapping up."

The weak state of the financial sector is a key reason why the broader market is struggling to gain its footing. Financials in the Standard & Poor's 500-stock index have suffered more than $1.2 trillion in losses since its Oct. 9, 2007, high, compared with a loss of just $263 billion in the 2000-02 bear market, says S&P. A year ago the sector was the index's largest but now sits third at 14.4 percent, behind tech and energy.

Analysts have been ratcheting down profit estimates for the second half of 2008. Expected third-quarter profit growth for the S&P 500 is now just 12.6 percent, down from 17.3 percent on April 1, says Thomson Reuters. Growth of 59.3 percent is still expected for the fourth quarter.

"Estimates still need to be trimmed," says Tobias Levkovich, Citigroup's chief investment strategist.

Investors will be listening closely to what companies have to say about the outlook for the remainder of the year when they release second-quarter earnings reports in coming weeks. Package-delivery giant UPS last week warned of weaker business activity for the remainder of the year, citing rising oil costs. Second-quarter profit is expected to drop 11.5 percent, down from an expected gain of 4.7 percent on Jan 1.

James Stack, editor of "InvesTech Research," calls this confluence of bad events a "perfect economic storm," which has caused the value of the stock market to decline more than $2 trillion this year.

Still, Stack points out that the Dow's current slump — which includes its worst June performance since the Great Depression — is just nine months long, still six months shy of the median bear market (half are shorter, half are longer). But with stocks trading at 13.4 times their forward 12-month profit projections, according to Thomson Reuters, Stack doesn't yet see a severe multiyear bear market like the ones in 1973-74 or 1929-32.

KEEP AN EYE ON S&P 500

A key thing to watch, Stack says, is if the broader S&P 500 can stay above the 1,273 low it hit in March at the peak of the credit crisis. Wednesday, it closed at 1,262, raising alarms. But one day does not make a trend, and if the large-stock index can climb back above that key level, that could signal a horrible outcome is not in the cards.

After Wednesday's nearly 2 percent drop, the S&P 500 is 19.4 percent off its record high and flirting with a bear market, defined as a drop of 20 percent or more. The tech-packed Nasdaq composite and small-stock Russell 2000 indexes are already in bear territory.

A mega-bear at Societe Generale, analyst Albert Edwards, warns of a deep recession caused by the fallout from the unwinding of the debt bubble. The ensuing sell-off, he says, will knock the S&P 500, now trading at 1,262, all the way down to 500. That equates to a drop of 60 percent from current levels.

But most forecasts are not as bearish. Citigroup's Levkovich says the market is on the final "V" of its "W" recovery pattern, suggesting that the current decline will eventually morph into a nice recovery.

Don't give up on the second-half rally just yet, says Phil Orlando, chief equity market strategist at Federated Investors. He expects frothy oil prices to pull back and predicts Fed rate cuts and tax rebate checks to stimulate the economy enough to jolt stocks out of their bearish phase.

"The second half will be better than the first half," he says. "The lion share of the pain is behind us."