A crummy 2 months for stocks
Posted
Feb 29 2008, 06:22 PM
by
Charley Blaine
Rating:
How bad have the first two months of 2008 been? Bad. January and February were the worst-ever opening two months for the Standard & Poor's 500 Index and the Nasdaq Composite Index. The Dow Jones Industrial Average wasn't much better.
The advice investors should take away from the numbers: Be patient for a bottom. Be very patient. The odds that the market will recover completely by year-end aren't great, if only because it will take a long time to solve all the problems facing the banking system and the credit markets.
(For some perspective, check Barry Ritholtz's blog The Big Picture. Barry also likes to toss in fun cartoons and thoughts about everything from digital cameras to rock music. Also, check Floyd Norris' blog at the New York Times site.)
The Dow finished the first two months of the year down 7.5%. Since 1928, that's the blue-chip index's 6th-worst opening two months. The worst was 1933, when the index fell 14.3%. The next worst was 2000, when the Dow fell a combined 11.9%.
The S&P 500 fell 9.4% in January and February. That's the worst opening two months since 1950, beating the first two months of 1978, when the S&P 500 fell 8.5%.
The Nasdaq was off 12.5% in January and February. That's the worst opening for the index, which was first published in 1971. The next-worst opening two months came in 2001, when it fell 12.9%.
Frankly, these are modest losses. In April and May 1932, the Dow lost a combined 39%. The S&P 500's worst two months were October and November, 1987, when the index fell 28.4%, and the Nasdaq's worst two months were February and March 2001, when the index fell 33.6%.
The best months? For the Dow, that's July-August 1932, when the index jumped 70.8%. For the S&P 500, go to January and February 1975, when the index jumped 19%. For the Nasdaq, it was November and December 1999, when it jumped 37.2%. And we all know what happened next.
So, does a lousy January and February tell us something about the year?
Generally, whenever January and February are down, the year will finish lower. If the first two months of the year are higher, the market's up on the year.
It's not a certainty. The Dow fell 5.4% to open 2003. The index finished up 25%. And that worst-ever opening two months in 1933? The Dow jumped 67% for the year -- the best percentage gain ever. The Nasdaq jumped 15.4% in the first two months of 2000 and finished the year down 21%.
The Dow winners for first two months of the year? I thought you might ask.
The answers are IBM, up 5.1%, and DuPont, up 5%.
The losers are Intel, down 33%, and Merck, down 22%.
The winners among S&P 500 stocks: EOG Resources, up 33.3%, Pulte Homes, up 28.5%, and Ryder System, up 22.6%.
It was so surprising to find a home builder as the second-best S&P 500 stock for the first months of the year that I should note that KB Home, another home builder, was 19th with a 10.8% gain. And fellow builder D.R. Horton was up 6.5%.
The losers: Ambac Financial Group, down 56.8%; Sprint Nextel, down 45.8%, and Harman International Industries, down 44.1%.
One last note: Apple was the seventh-worst S&P 500 performer, down 36.9%. Google was tenth worst with a 31.9% loss. Yahoo was up 19.4%, good for seventh among S&P 500 gainers, thanks to the $44.6 billion bid from Microsoft (the publisher of MSN Money).
Microsoft had a difficult month, falling nearly 17% in February after announcing the Yahoo bid. It was down 23.6% through February, 30th worst among the S&P 500.
Note1: The data was updated at 10:30 p.m. ET Friday.
Note 2: Further down in the comments, I noted that the Dow finished February 1.6% under its 2006 close. The S&P 500 was 6.2%, and the Nasdaq was off 5.95% from its 2006 close.
That got me to thinking how the Dow stocks themselves have fared.
The answer is that, as of Monday's close,17 of 30 Dow stocks are trading under their 2006 closing prices.
The losers are Citigroup, down nearly 59%, and American International Group, down aboout 35%. No big surprise. Financial stocks have been killed in the last year.
The winners are Alcoa, up 27.7%, followed by Coca-Cola, up 22.3%, and McDonald's, up 19.9%.
Alcoa is a winner from the big jump in commodity prices as well as a huge bet by traders around the world that the aluminum industry is going to consolidate further.
Coca-Cola and McDonald's are winners because people want soda and snacks. In addition, both are winners from the dollar's decline, which has boosted the value of profits earned outside the United States.
How have the big energy stocks fared? ExxonMobil is up 14.5% from the end of 2006, and Chevron is up 18.6%.
