Hot start: Dow, Standard & Poor's have best January since 1997
NEW YORK – It's the best start for stocks in 15 years.
In what was mostly a slow and steady climb, the Dow Jones industrial average rose 3.4% in January and the Standard & Poor's 500 gained 4.4%, the best performances for both indexes to open a year since 1997.
Investors were encouraged by modest but welcome improvement in the U.S. economy, including an 8.5% unemployment rate, the lowest in almost three years. Corporate profits didn't wow anyone — except Apple's — but they were good enough.
"I don't see anything really glamorous or tremendous about the economy or earnings," Harris said. "But I think they're very acceptable, and things are grinding along."
An unexpected drop in consumer confidence dragged stocks down on the final day of the month. The Dow average finished down 20.81 points, or 0.2% at 12,632.91.
On Tuesday, the Dow started the day up 66 points after encouraging signs from Europe that Greece might finally complete a deal to cut its crushing debt, a step toward securing a critical €130 billion bailout payment.
Greece is negotiating with investors who bought its government bonds. They are expected to swap their bonds for new ones with half the face value, plus a lower interest rate and longer term of maturity.
Investors are increasingly worried that Portugal may need a similar deal with its private creditors. European leaders insist the Greek reduction is a one-time event. Portugal's borrowing costs have risen to record highs.
Back home in the United States, investors have enjoyed a steady climb through January amid signs of an improving economy. Unemployment has fallen from a 10% peak in October 2009 to 8.5% last month.
The Dow lost its gains after the Conference Board reported that its consumer confidence index fell to 61.1 in January, down from 64.8 in December. Economists had expected 68.
There were also signs that the housing market continues to struggle. Home prices fell in November for a third straight month in in 19 of the 20 cities tracked by the S&P/Case-Shiller index. The biggest declines were in Atlanta, Chicago and Detroit.
Eight of the 10 major categories in the S&P 500 were lower for the day. Telecommunications stocks and financial stocks managed small gains.
Stocks rose in Europe on Tuesday on hopes the continent is making progress in its fight to contain the debt crisis, but they lost some of their shine after a run of soft U.S. economic data.
Sentiment in the first half of the day in Europe was buoyant after European leaders agreed the broad outlines of a deal to tie the countries that use the euro closer together and on hopes that Greece is close to a debt-reduction deal with private creditors.
Late Monday, following the agreement by a large majority of countries in the European Union to sign a new treaty designed to stop overspending, Greece's Prime Minister Lucas Papademos indicated that progress was being made.
Though Greece remains the epicenter of Europe's debt crisis, leaders are pushing ahead with other plans to tie economies together. Only Britain and the Czech Republicopted out of signing the new treaty, commonly known as the fiscal compact, which is meant to make it more difficult for countries to run up massive debts, like the ones now roiling the 17-nation eurozone.
The hope among participants is that the tighter rules will restore confidence in their joint currency and convince investors that all of them will get their debts under control. For now, investors appear to be giving European policymakers the benefit of the doubt, especially as there are hopes a second bailout of Greece will be agreed alongside a debt-reduction deal between the country and its private creditors, possibly as soon as this week.
In London, the FTSE 100 index of leading British shares was up 0.2% at 5,681.61 while Germany's DAX rose 0.2% to 6,458.91. The CAC-40 in France was 1% higher at 3,298,55.
The more skittish mood in markets was evident in the performance of the euro, which was down at $1.31, having earlier traded above $1.32. The euro often garners support when investors look to take on more risk.
Europe's debt woes remain the main worry in the markets. A growing fear is that Portugal may also need to get private creditors to reduce their debts, even though Europe's leaders say Greece's debt-reduction deal is a one-off. Portugal's borrowing costs have been rising consistently to record highs over recent days as the economy shows few signs of improving.
Posted at 08:39AM Feb 03, 2012 by Lori Kehoe in General | Comments[0]
