No January effect: U.S. equities sell-off
By Laura Alspaugh, CFA | February 1, 2008
The January effect is when stocks begin the year with a rally. Sadly, there was no January effect for 2008. The U.S. equity markets started the year with a 10% sell-off through mid month. Things were looking bleak for investors as the economic reports were gloomy: GDP’s paltry 0.6% growth rate, weak retail results, and soft employment data.
With recession looking more and more likely, the Fed took an aggressive posture with a 75 basis point rate cut on January 22nd and again another 50 basis points on January 30th.
The Fed’s action sparked a rebound from those mid-month lows, but the S&P 500 still ended January with losses across the board. Financial stocks posted gains as these were immediately boosted by the Fed’s actions. In particular, banks and REITs gained for the month.
Technology stocks were hurt and one of the main drivers was Apple which fell over 31%. But Apple’s decline is a mere fraction of this past year’s increase, which resulted in its market cap exceeding that of both Citigroup and IBM.
The other news is that Congress put party lines aside to approve the President’s $150 billion fiscal stimulus package aimed at putting money back in the hands of the consumer. The Senate now needs to approve the package. This also helped boost the markets higher at month end.
So far, 2008 has been bumpy ride for investors. Fasten your belts.
Topics: Markets, The Economy |