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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Stocks end January in the red -- a bad sign, historically

Stocks ended the first month of the year in the red, which historically has been a bad sign for the remainder of the year.

For all of January, the Dow was down 360.72 points, or 3.46 percent, closing the month at 10,067.33.

It was the largest monthly percentage and point drop since February 2009, the month right before the market bottomed. It was also the third losing January in a row.

As I've written here before, January is historically a pretty decent predictor of market performance for the year, at least with the S&P 500.

The S&P 500 also had a bad month, finishing January down by about the same amount as the Dow.

If the S&P 500 is up for the first five days of the year, there's a 75 percent chance it will be up for the remainder of the year. If it is down for the first five days of the year, there's only a 44 percent chance it will be up for the year. (The S&P 500 was up for the first five trading days of this year.)

For the whole month of January, from 1960 through 2007, the S&P 500 finished with a negative return 17 times. Of those 17 years, there were only three when the S&P 500 finished the full year with a gain of more than 5 percent. So it's accurate to say that in 14 of the 17 years, a poor January predicted a poor full year.

(And we won't even get into the Nasdaq, which had a terrible month -- down more than 5 percent.)

A stock-picker on CNBC this morning predicted that the markets will test their March 2009 lows. That would mean, for instance, that the Dow would have to lose 3,500 points, falling from just over 10,000 to 6,500. That seems like a radical prediction, but if you were expecting the March-to-December rally to continue, that sounds even more far-fetched to me -- especially with unemployment at 10 percent.

Follow me on Twitter at @theticker

By Frank Ahrens  |  January 29, 2010; 5:13 PM ET
Categories:  The Ticker  | Tags: Dow Jones, nasdaq, s&p 500, unemployment  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati   Google Buzz   Previous: Today's GDP numbers should have pushed markets higher -- what happened?
Next: Listen to me talking on CNBC today about Obama vs. the GOP


"It's still Bush's fault"-Barack Hussein Obama.

Posted by: cschotta1 | January 29, 2010 8:01 PM | Report abuse

Lets remember these FACTS:

1- Stock market is UP 16% since Obama Admin took office, vs down 30% the last year of Bush.

2- Stock market is UP 33% since the stimulus package was passed.

3- Stock market is down nearly 5% since Scott Brown won MA elections.

All of which FACT speaks loudly as to how BAD Republicans are for US economy. More on this fact here:

Posted by: RealNews1 | January 29, 2010 8:26 PM | Report abuse

"All of which FACT speaks loudly as to how BAD Republicans are for US economy"

The thing is, in Democratic circles, this passes as doctoral-level economic thinking.

Posted by: Ombudsman1 | January 29, 2010 8:53 PM | Report abuse

Correlation is not necessarily causal. This article is about superstition, not economics.

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Posted by: setrjhytkytjefthtjhyju | January 29, 2010 9:29 PM | Report abuse

I'm not even sure if the stock market is a key indicator of the health of the economy anymore. It's more like a casino/private club financing mechanism.

Inventories, employment numbers, retail sales, construction starts, are all more telling than whatever the stock market is doing.

Posted by: inono | January 30, 2010 1:12 AM | Report abuse

Wall Street's interests are not aligned with Main Street's, nor should you be deluded into thinking that the casino operators lose any sleep over whether you have a job or not.

Posted by: bdunn1 | January 30, 2010 7:43 AM | Report abuse

Hey RealNews1 - try doing a little research versus posting political propaganda. If you know anything about the market - you know it discounts the future. i.e. The market moves in advance of events. The market started cracking in June/July 2010 when Hillary had to bown out after she was thugged at caucases by Obama's ACORN thugs. At that point it was McCain and Obama. The probability increased that Obama might win so samrt money started selling quietly. As Hussein's poll numbers went up, the market sold off more. Businesses have zero confidence in the marxist and they are not hiring people. Obama is a disaster for America.

Posted by: Franc33432 | January 30, 2010 3:43 PM | Report abuse

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