NEW YORK >> Considering January's history as a reliable barometer for the full year's performance, it's troubling enough that Wall Street suffered a loss for the month. But analysts see another reason to worry -- a look at the best sector performers in January shows little sign of a bellwether to help lift the market. Lack of sector leadership
a worryBy Hope Yen
Associated PressWall Street's three major indexes dropped for a third straight week this past week, with stocks reaching three-month lows on fears of weak corporate profits and an imminent war with Iraq. That helped give the Dow Jones industrials a 3.5 percent drop for the month, while the Nasdaq composite index declined 1.1 percent and the Standard & Poor's 500 lost 2.7 percent.
According to believers, the January barometer dictates a poor yearly performance if the S&P 500 index falls in the first month of the year. It has been accurate each year since 1950, with the exception of four times, the Stock Trader's Almanac says.
Some analysts, calling the barometer simplistic, say recent sector performance is more troubling.
"There's just been no real persistent, meaningful leadership in this marketplace," said Charles White, portfolio manager at Avatar Associates. "The bursting of the stock bubble seen over the last couple of years has sort of rendered these once highly regarded indicators not useful."
Top performing sectors in January were diverse, including pipelines, with a 14 percent gain; nonferrous metals, up 8 percent; communications technology, rising 6 percent; Internet services, up 6 percent; and home construction, up about 4.5 percent.
The biggest decliners included coal, down about 13 percent; aluminum, falling 12 percent; household durables, declining 11 percent; and tobacco, off 10 percent.
"They're all tied to the current economic story," said Ed Peters, chief investment officer at PanAgora Asset Management, citing recent strong housing sales and the fortunes of oil amid growing tensions with Iraq.
"The others are those that have been so beat up, such as Internet services, it's a bounce back," he said. "But whether that has legs or not, that's what we don't know."
Indeed, it was the technology and telecom sectors that led the market higher in the heyday late 1990s; but they also were the main culprits guiding the subsequent three-year decline.
Analysts are doubtful Wall Street can see that kind of market leadership again and instead predict pockets of strength amid a broader based recovery. They explained the economy will remain sluggish overall until companies commit to more capital spending, which won't happen until tensions with Iraq are resolved.
Among the sectors expected to see continued gains, at least in the short term: oil and technology.
"If the market is going to get out of its malaise, it's going to do it on the back of more visible economic growth," which will lead to greater corporate spending, White said. "The leadership probably should come from the financial services area and maybe get a rebound out of certain elements of information technology."
Richard Dickson, senior market strategist at Lowry's Research Reports, agreed.
"Trading over the past few months appears to have been dominated by momentum players and the tech stocks continue to offer the most action with their high volatility," he said in a research report.
Wall Street's indexes suffered their third straight weekly declines. For the week, the Dow fell 77.20, or 1 percent. It closed yesterday at 8,053.81.
The Nasdaq had a weekly loss of 21.23, or 1.6 percent, ending at 1,320.91 yesterday. The S&P 500 index had a weekly decline of 5.70, or 0.7 percent, finishing at 855.70 yesterday.
For the week, the Russell 2000 index, the barometer of smaller company stocks, fell 2.89, or 0.8 percent. It ended yesterday at 372.17.
The Wilshire 5000 Total Market Index, which tracks more than 5,700 U.S.-based companies, ended the week at 8,125.07, down 50.68 from the previous week. A year ago, the index was at 10,490.17.
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