Stocks end a losing Jan. amid doubts on recovery

NEW YORK - Stocks ended January with a loss as investors questioned whether the economy could sustain its big fourth-quarter growth rate. Downbeat earnings at tech companies also pulled stocks down.

The Dow Jones industrials fell 53 points yesterday to close the month with a loss of 3.4 percent. Investors who are increasingly uneasy about the economy, earnings, and politics have pulled money out of the market over the last week.

Many market watchers believe January sets the tone for stocks for the rest of the year. Historical data back that up. Since 1950, the Standard & Poor 500 index's full-year direction has matched its January performance more than 90 percent of the time, according to the Stock Trader's Almanac.

Still, the January barometer isn't foolproof. Last year, when the market had its worst January ever, the Dow fell 11.4 percent for the month, and then posted an 18.8 percent gain for all of 2009.

Stocks initially rose yesterday after the Commerce Department said the gross domestic product, the broadest measure of the economy, expanded at an annual rate of 5.7 percent during the fourth quarter, topping forecasts of 4.5 percent. The strong GDP growth, coupled with an upbeat report on manufacturing in the Midwest, reassured investors that the recovery was continuing.

However, the GDP numbers also raised questions about the sustainability of a recovery. Most of the growth came from companies replenishing low inventories. Rebuilding inventories tends to create just a temporary bump.

The Dow fell 53.13, or 0.5 percent, yesterday to 10,067.33. The S&P 500 index fell 10.66, or 1 percent, to 1,073.87, while the Nasdaq composite index fell 31.65, or 1.5 percent, to 2,147.35, lagging the other indicators after a disappointing earnings report from Microsoft Corp.

There was good economic news yesterday, but not enough for the market to hold its gains. The Chicago Purchasing Managers Index rose more than expected, providing some evidence that the manufacturing sector, at least in the Midwest, is rebounding as well. The Chicago PMI climbed to 61.5 in January from 58.7 last month. Economists were expecting a reading of 57.5 for January.

The Chicago report is seen as a precursor to the national Institute for Supply Management report due out Monday.

Fourth-quarter earnings reports continued, and extended the pattern of mixed results among the companies that have already reported.

Microsoft said late Thursday that it beat analysts' expectations, but the company reported slow spending on software by corporations. Analysts say firms can no longer get by just beating expectations; they need to show revenue growth and signs of future strengthening.

The company's stock fell 98 cents, or 3.4 percent, to $28.18.

The dollar rose against other currencies; gold prices fell.

The Russell 2000 index of smaller companies fell 5.89, or 1 percent, to 602.04.