A Not-So-Happy New Year for Investors
Saturday, January 24, 2009
So much for Santa Claus and other high hopes.
The post-Christmas rally that seemed to propel the stock market out of the depths and into the new year has dissipated into plain old wintry gloom.
Each of the major indexes is down sharply since the post-holiday surge. Since Jan. 6, the Dow Jones industrial average is down 10 percent, the Standard & Poor's 500-stock index is down 11 percent and the Nasdaq composite index is down 11 percent.
Though the markets were relatively flat yesterday -- the Dow dropped 0.6 percent, or 45.24 points, to 8077.56, while the S&P 500 rose 0.5 percent, or 4.45 points, to 831.95 -- thus far it has been a disappointing January.
"We started off with an awful lot of high expectations," said Sam Stovall, chief investment strategist for S&P Equity Research. "This just shows that there is an awful lot of uncertainty out there."
Analysts said the recent decline stems in large part from reports of staggering new losses at financial titans Citigroup and Bank of America, big enough that Bank of America was rendered another dose of government assistance. This has provoked questions about the solvency of institutions throughout the financial world.
Add to that the downturn in earnings for some blue-chip companies and layoffs at stalwarts such as Microsoft (5,000 jobs), Alcoa (15,000), Intel (5,000 to 6,000) and Pfizer (3,200), and there's reason enough for some investors to check out of the market.
Like other analysts, E. William Stone, chief investment strategist for PNC Wealth Management, said the trouble for banks has generated trouble for stocks across other parts of the economy.
"The tentacles of the financial sector reach out to all the other industries," he said. "We're still struggling with the feeling that we are still in a free-fall."
It's bleak enough now, he added, that market watchers are looking not for signs of a rebound but for signs of a "decline in the rate of decline."
Since the new year, the market has been beset by a string of bad news from some of the world's biggest financial institutions.
Citigroup said it lost $19 billion last year.