January 31, 2009

For the stock market, 2009 began much as 2008 ended, with the biggest January loss for the Dow Jones Industrial Average and Standard & Poor's 500 on record.Friday, banks such as Citigroup, industrial giants such as Caterpillar and consumer staples like Procter & Gamble sold off as wave after wave of layoffs and worsening economic data quenched a rally earlier in the week related to another rumored bank-rescue plan.

The financial sector remains the pivotal axis for the market, because traders believe economic and stock-market stability isn't possible until the fears about the solvency of major banks have receded. It's a vicious circle, however, because the banks' profit prospects and asset values are affected by the economic data.