Wall Street Ends Worst January Ever with Record Percentage Drops

Strategic Insights -

Stock markets closed the worst January on record, with the Dow Jones industrial average and Standard & Poor's 500 index suffering record percentage drops of 8.84 and 8.57 percent, respectively. Investors remained on edge about the economy and were further rattled by reports that the government's plans to help banks may have hit a snag. Despite a milder-than-expected report on fourth-quarter economic activity, many analysts believe the economy is worsening, with gross domestic product shrinking at a 3.8-percent pace in the final three months of 2008.

Key Takeaways:

  • The Dow Jones industrial average and Standard & Poor's 500 index experienced record percentage drops of 8.84 and 8.57 percent, respectively, marking the worst January on record.
  • Investors were concerned about the economy and were further rattled by reports that the government's plans to help banks may have hit a snag.
  • A milder-than-expected report on fourth-quarter economic activity showed gross domestic product shrinking at a 3.8-percent pace, but many analysts believe the economy is worsening.
  • Weak earnings reports and rising job losses have contributed to solidifying the belief that the economy is shrinking at an even faster pace in the first quarter.
  • Investors were disappointed by corporate earnings reports, including Procter & Gamble Co.'s 3 percent sales drop in the fourth quarter and Honda Motor Co.'s 90 percent earnings drop.
  • Japanese electronics maker NEC Corp. announced it will cut 20,000 jobs worldwide due to a $1.46 billion loss for the fourth quarter.
  • Amazon.com Inc. reported a 9 percent increase in fourth-quarter profit, easily surpassing analysts' forecasts, and provided an optimistic forecast for 2009.

Statistics:

  • The Dow Jones industrial average fell 148.55, or 1.82 percent, to 8,000.46.
  • The Standard & Poor's 500 index fell 19.26, or 2.28 percent, to 825.88.
  • The Nasdaq composite index fell 31.42, or 2.08 percent, to 1,476.42.
  • The Russell 2000 index of smaller companies fell 9.71, or 2.14 percent, to 443.53.
  • Gross domestic product shrunk at a 3.8-percent pace in the final three months of 2008.
  • Unemployment claims reached a record high and new home sales hit a record low.
  • Procter & Gamble Co. saw a 3 percent sales drop in the fourth quarter, and Honda Motor Co.'s earnings dropped 90 percent.
  • NEC Corp. announced a $1.46 billion loss for the fourth quarter and will cut 20,000 jobs worldwide.

Sources:

  • Associated Press
  • Wall Street Journal
  • New York Times
  • Bloomberg
  • Reuters
  • CNBC
  • CNN
  • Fox Business
  • Forbes