Worst January Ever for Dow, S& P 500
Saturday, January 31, 2009
Facing more evidence of a weak economy, stocks tumbled again yesterday and capped the worst January in history.
The Dow Jones industrial average briefly traded below 8000, then closed down 1.8 percent, or 148.15 points, at 8000.86. The Standard & Poor's 500-stock index fell 2.3 percent, or 19.26 points, to 825.88, while the tech-heavy Nasdaq composite index lost 2.1 percent, or 31.42 points, to close at 1476.42.
Despite rallying earlier this week after two days of sell-offs, all of the indexes were down slightly for the week. It also capped a rough month for the S&P and Dow, which both fell about 9 percent -- the largest January sell-off ever for both indexes. The Nasdaq fell about 6 percent in January. During the past 30 years, Wall Street's performance in January has accurately predicted the direction of stocks for the remainder of the year 87 percent of the time, according to Dow Jones Indexes.
The market has found a "rough bottom," said Collin Monsarrat, a trader at Connecticut-based Birinyi Associates. But "that doesn't mean go rush out and buy. There is still a lot of risk in the market."
Investors had largely shrugged off massive layoff announcements and signs of increasing weakness in the housing market earlier this week, while cheering reports that government officials are contemplating a program to buy up the toxic assets of troubled banks. But the bad news continued to build, including a government report yesterday that the gross domestic product shrank by 3.8 percent during the last three months of the year, the steepest contraction since 1982.
Despite evidence that the economy's problems deepened during the latter part of the year, the results were better than expected, said Nigel Gault, chief U.S. economist for IHS Global Insight. "But scratch the surface just a little and the good news melts away. Spending across most major private sector categories plunged," he said.
Investors also digested a mixed batch of earnings reports yesterday.
Procter & Gamble reported that its profit for the October-through-December quarter climbed 53 percent as it sold its Folgers coffee business. But the company lowered expectations for 2009 and its stock fell 6 percent, to $54.50 a share.
Exxon Mobil's stock fell 52 cents, less than 1 percent, to $76.48 a share after it reported that plummeting fuel prices helped drag down profits 33 percent in the fourth quarter. The company still managed to report a profit of $45.2 billion for 2008 -- the largest in U.S. history. Rival Chevron earned $4.9 billion during the fourth quarter and $23.9 billion for the year. Its stock fell 10 cents, less than 1 percent, to $70.52 a share.