NEW YORK (CNNMoney.com) -- Stocks tumbled Friday, with the tech-heavy Nasdaq leading the way down, as investors bet that the strong economic growth seen in the fourth quarter of last year can't be sustained.
The Dow Jones industrial average (INDU) lost 53 points, or 0.5%. The S&P 500 index (SPX) lost 11 points, or 1%. The Nasdaq composite (COMP) fell 31 points, or 1.5%. The Dow and S&P 500 closed at the lowest point since Dec. 6 of last year and the Nasdaq at the lowest point since Nov. 30.
Technology and commodity shares led the declines for the second session in a row, following Thursday's big selloff.
"I think some of this is an indictment of what we're seeing in the economy," said Don DeWaay, CEO at DeWaay Capital Management. "People are realizing that although GDP growth was good in the fourth quarter of last year, 2010 isn't going to be as strong as had been thought."
January: For the month of January, the Dow lost 3.5%, its biggest monthly loss since Feb. 2009, when it fell 11.7%. The S&P 500 lost 3.7%, its biggest monthly loss since Feb. 2009, when it lost 11%. The Nasdaq composite lost 5.4%, for its biggest monthly loss since Feb. 2009, when it gave up 6.7%.
This was a bad sign for those who follow the January Barometer, which says that as January goes, so goes the year. More specifically, as the S&P 500 goes, so goes the year, according to the Stock Trader's Almanac. Since 1950, all down Januarys were followed by a new or continuing bear market, a 10% correction or a flat market, meaning less than 5% higher or lower than where the year began.
However, the indicator is best taken with a grain of salt, as markets can still produce gains within long-term bear markets. For example, in 2003, the S&P lost 2.7% but still ended the year up 26.4%.
Friday's market: Stocks rallied through the morning as the stronger-than-expected GDP report seemed to soothe some of the market's recent worries. Better-than-expected readings on consumer sentiment and manufacturing also gave stocks an initial pop.
But the worries of the last two weeks resurfaced as the session wore on. Last week's selloff was sparked by worries about China's bank reserves and the Obama administration's plan to restrict trading by big banks.
The stock selloff was fairly broad based, although technology led the way. Intel, Microsoft, IBM, Apple and Hewlett-Packard were among the big decliners.
Treasury prices rose in a classic bid-to-safety move and the dollar firmed up versus other major currencies. The Vix (VIX), Wall Street's so-called fear gauge, climbed 3.8% as the stock selloff took hold.
Stocks tumbled Thursday after a cautious outlook from Qualcomm decked techs. A Standard & Poor's report saying the U.K.'s banking system is no longer one of the most stable and low risk also played a role in the selling.
On the upside, Federal Reserve Chairman Ben Bernanke was confirmed for a second term Thursday, ending the uncertainty that had hung over the market of late.
GDP: Gross domestic product, the broadest measure of the economy, grew at a 5.7% annual rate in the fourth quarter, better than forecast and more than double the pace it grew in the third quarter. Economists surveyed by Briefing.com thought GDP would grow at a 4.7% annual rate after it grew at a 2.2% rate in the previous quarter.
Economy: In other economic news, the consumer sentiment index from the University of Michigan rose to 74.4 from 72.8 previously. Economists surveyed by Briefing.com thought it would rise to 73, according to Briefing.com estimates.
The Chicago PMI, a regional reading on manufacturing, rose to 61.5 from 58.7 previously. Economists thought it would fall to 57.2.
Jobs: President Obama is set to unveil a $33 billion package of tax credits later Friday aimed at sparking more job growth. The plan includes providing a $5,000 tax credit for each net new employee a business hires.
Quarterly results: Two tech bellwethers reported results after the close of trade Thursday.
Dow component Microsoft (MSFT, Fortune 500) reported higher quarterly sales and earnings that beat estimates, thanks to strong sales of Windows 7, the company's newest operating system. Nonetheless, shares fell 4% in the big tech selloff.
With 220 companies, or 44% of the S&P 500 having already reported results, earnings are on track to have grown 206% from a year earlier, according to the latest estimates from earnings tracker Thomson Reuters. Revenue is on track to have grown 7% versus a year earlier.
Companies are benefiting from continued cost-cutting in the aftermath of the recession and from easy comparisons to the prior year. The fourth quarter of 2008 was the worst for quarterly profits in Thomson's 15-year history.
However, much of the year-over-year growth is concentrated in the financial sector, which reported a loss in 2008 and is on track to report big profits for 2009. Strip out financial sector earnings and overall earnings growth drops to 15%, while revenue growth drops to 2%.
World markets: Asian markets tumbled, extending the recent selloff amid China's bank lending curbs and S&P's warning that it may cut Japan's debt. European markets rallied, with the London FTSE up 0.8%, the German DAX up 1.2% and the French CAC 40 up 1.4%.
Commodities and the dollar: The dollar gained versus the euro and the yen.
COMEX gold for February delivery fell 60 cents to $1,083 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.
U.S. light crude oil for February delivery fell 75 cents to $72.89 a barrel on the New York Mercantile Exchange.
Bonds: Treasury prices rallied, lowering the yield on the 10-year note to 3.61% from 3.64% late Thursday. Treasury prices and yields move in opposite directions.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.80%||3.88%|
|15 yr fixed||3.20%||3.23%|
|30 yr refi||3.82%||3.93%|
|15 yr refi||3.20%||3.23%|
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