January bodes ill for market year
NEW YORK – Stocks ended a disappointing January with a loss as investors questioned whether the economy will be able to sustain its big fourth-quarter growth rate. Downbeat earnings at tech companies also pulled stocks down.
The Dow Jones industrials fell 53 points Friday to close the month down 3.5 percent. Just 10 days earlier, the average was at a 15-month high. Investors who are increasingly uneasy about the economy, earnings and politics have been pulling money out of the market over the past week.
January was the worst month for the market since last February. Many market watchers believe January sets the tone for stocks for the rest of the year. Since 1950, the Standard & Poor’s 500’s full-year direction has matched its January performance more than 90 percent of the time, according to the Stock Trader’s Almanac.
Still, the January barometer can be faulty. Last year, when the market had its worst January ever, the Dow fell 11.4 percent for the month and then went on to post an 18.8 percent gain for all of 2009.
The Dow Jones industrial average closed the week down 105.65, or 1 percent, at 10,067.33. The Standard & Poor’s 500 index fell 17.89, or 1.6 percent, to 1,073.87. The Nasdaq composite index fell 57.94, or 2.6 percent, to 2,147.35.
Stocks inititally rose Friday after the Commerce Department said gross domestic product, the broadest measure of the economy, expanded at an annual rate of 5.7 percent during the fourth quarter, easily topping forecasts of 4.5 percent. The strong growth, coupled with an upbeat report on manufacturing in the Midwest, reassured investors about the economy.
However, details within the GDP report also raised questions about how well the recovery can be sustained. Most of the growth came from companies replenishing low inventories, which tends to create just a temporary bump in growth.
“The GDP report looks shiny and new on the surface,” said Alan Gayle, senior investment strategist for RidgeWorth Investments. “But once you open up the hood, you start to see it’s not as great as on the outside.”