NEW YORK (
) -- Stocks slumped on January's last trading day despite Friday's robust fourth-quarter GDP growth and a slew of strong earnings reports. The major averages put in their worst month since February 2009.
Stocks erased earlier gains made on a
as U.S. indices finished the week -- and the month -- in the red.
Dow Jones Industrial Average
shed nearly 106 points this week, or 1% and finished the month 1% lower. The
lost 18 points, or 1.6%, on the week and slumped 3.7% this month while the
surrendered 58 points, or 2.6%, weekly and lost 5.5% in January.
On Friday, the
Dow Jones Industrial Average
lost 53 points, or 0.5%, to close at 10,067. The
shed 11 points, or 1%, at 1074 and the
finished down by 32 points, or 1.5%, at 2147.
"Despite earnings, markets have been taking their cues from overseas all week -- whether it's been concerns about China or Greece -- there's been a lot of questions about where growth is going to come from," said Mike Sokoll, director of Nasdaq OMX's market intelligence desk. "So even though we had a strong GDP number today, market gains didn't hold. I think perhaps people are wondering whether this is just stimulus juice and whether growth can hold up."
>>Microsoft Sees Lower IT Spending
The tech sector led the declines, with key tech stocks among the Dow's worst performers. Microsoft,
were the day's biggest duds, with
not far behind.
"Tech has been one of the market's leading sectors, so they're a likely place to take profits," Sokoll added.
Sirius XM Radio
and Intel were seeing heavy volume on the Nasdaq, with only Sirius trading in green territory.
An 8% decline in
Microsoft's business sales appeared to spark fears that weak enterprise spending could flatten future technology growth.
"I think investors are perceiving Microsoft as having peaked," said David Chalupnik, head of equities at First American Funds, who added that he doesn't necessarily believe in the sentiment. "Even though Microsoft gave a great report, investors are questioning its growth prospects, since consumers spent more on technology, but now that Christmas is over and we're not yet seeing business spending improve, the market is questioning whether this strong growth can last."
Chalupnik sees similar sustainability questions turning up in regards to the larger economy.
"We had great economic data today, but the market needs to see the employment picture improve before it can start believing that this growth is sustainable," he said.
advance gross domestic product, a first reading subject to two more revisions, showed the economy grew 5.7% in the fourth quarter. That's faster than economists expected, according to the consensus 4.7% forecast, and the swiftest pace in roughly six years.
Separately, Economic Policy Institute economist Josh Bivens agreed that the job market needs to turn around before the recovery story can be believed.
"It's far too early to break out the champagne and declare 'recovery accomplished,' " Bivens said. "Even if this growth rate were to be sustained for three years, we would still not create enough jobs to climb out of this hole caused by the recession. Worse, this growth will not be sustained. This quarter's growth was driven largely by a restocking of business inventories that will not be repeated in coming quarters."
Don't Open the GDP Champagne
Although the unemployment index remains high at 10%, U.S. consumer confidence jumped to its highest level in two years in January, according to the University of Michigan consumer surveys. The final January reading of 74.4 surpassed both a preliminary reading of 72.8 and economists' projected level of 73.
In another stronger-than-expected report, the Chicago National Association of Purchasing Managers' regional purchasing managers' index for January surged to 61.5, surprising economists who had been anticipating a mild decline to 57.4, according to consensus estimates.
U.S. employment costs rose 0.5% in the fourth quarter, according to a separate report from the Labor Department, which was slightly higher than the 0.4% increase that economists had been expecting. The report said wages and salaries, which make up 70% of compensation, and benefits, which comprise the remaining 30%, rose by the same amount of 0.5%.
was one of the Dow's best performers, preceded only by
. Goldman Sachs raised its rating on Wal-Mart to buy a day after it announced plans to streamline some of its U.S. operations and to create a new division to oversee its e-commerce business. The retailer's stock rose 1.6%, to close at $53.43.
Bank of America
continued to see heavy volume on the
New York Stock Exchange
, which had a listed volume of 5.4 billion.
was also one of the Dow's worst performers with shares closing down by 1.5%, at $72.12. The oil company posted a 37% decline in fourth-quarter net income and fell short of analysts' profit estimates, although sales of $47.6 billion surpassed expectations.
, which reports on Monday, finished the session slightly lower at $64.43.
, meanwhile, saw shares shed $3.47, or 14.1% to $21.07 after it missed expectations by 16 cents.
stock also struggled, closing nearly 12% lower, after the company issued a sales forecast that was roughly in line with consensus estimates.
Friday also brought some positive earnings reports.
slightly beat profit estimates and reaffirmed its 2010 outlook. The stock, however, finished down by 3%, at $38.64.
reported an 86% spike in fourth-quarter earnings, topping expectations but its stock fell 1.6%, to $19.72.
, which managed to hold gains made on the company's easy profit beat and positive outlook late Thursday, saw shares turn negative. The stock lost 62 cents, or 0.5%, to close at $125.41.
The Nasdaq's Mike Sokoll expects the market to continue to look past earnings in the coming week.
"The market has been looking elsewhere or concentrating on 2010 outlooks," Sokoll said, adding that at his last check, nearly 80% of S&P companies had beat analysts' estimates while only 13% missed. Remaining companies were roughly in line with expectations.
"This suggests much of the earnings performance has already been priced in. Unless a company really knocks it out of the ballpark, I don't see a reason why things would change next week."
Commodities weakened as the U.S. dollar strengthened against a basket of currencies, with the dollar index up by 0.7%. Crude oil for March delivery lost 1%, or 75 cents during the session, to settle at $72.89 a barrel. The most actively traded April
gold contract settled $1 lower, at $1,083.80 an ounce.
Safe assets saw increased demand as the benchmark 10-year Treasury note strengthened 13/32, dropping the yield to 3.594%.
Asian stocks closed lower as concerns intensified over rising debt levels in Greece and Portugal. Hong Kong's Hang Seng was down 1.2%, and Japan's Nikkei was lower by 2.1%. The FTSE in London was up 0.8%, and the DAX in Frankfurt was ahead by 1.2%.
-- Written by Melinda Peer in New York