- The Washington Times - Saturday, January 31, 2009

Wall Street sank Friday largely in reaction to the government reporting a 3.8 percent annual rate of decline in the economy in the fourth quarter of 2008.

The major indexes all fell sharply for the second straight day, leaving the Dow Jones Industrial Average and Standard & Poor’s 500 Index with record percentage drops for January — 8.84 percent and 8.57 percent, respectively.

The S&P; on Friday slipped 19.26, or 2.28 percent, to 825.88 to complete a fourth straight weekly drop, its longest losing streak since July. At the close, the Dow plunged 148.15, or 1.82 percent, to 8,000.86, and the Nasdaq Composite Index dropped 31.42, or 2.08 percent, to 1,476.42.

Another drag on the markets, led by the financial sector, appeared to stem from reports on CNBC that the Obama administration may be having second thoughts about creating a government-run “bad bank” to assume the debts of banks that have incurred mounting losses because of the economic crash in September.

The markets initially reacted positively to the Commerce Department report that the nation’s economy shrank at an annual rate of 3.8 percent in the final three months of last year because economists had expected the gross domestic product to show a contraction of at least 5.4 percent.

The GDP is the total of all goods and services produced by the economy.

But the markets turned negative after the first half-hour when investors began digesting the meaning of the report, which marked the worst showing for the economy since the first quarter of 1982, when the economy was in recession.

Concerns about corporate earnings also weighed down the markets even as Exxon Mobil Corp. announced that it broke its own record of profits for 2008 with a $45.2 billion showing.

But the company’s profits dropped 33 percent in the fourth quarter because the price of oil plunged from its high of $147 a barrel in July.

The price of a barrel of light, sweet crude rose Friday to more than $42 on the New York Mercantile Exchange.

Corporate earnings, whose generally poor showings in the recession-ridden economy have been a drag on the markets - especially those in the financial sector - were a mixed bag Friday.

Giant Proctor & Gamble Co., which makes everything from Crest toothpaste to Tide detergent, reported a 53 percent jump in profit in the October-to-December period, in part because of its sale of Folgers coffee.

But Honda Motor Co. said its earnings plunged by more than 90 percent in the quarter and cut its profit outlook for this year.

Good news came from Amazon.com Inc. after the markets closed Thursday, reporting that its fourth-quarter profits jumped 9 percent, surpassing economists’ forecasts. Its outlook for this year was optimistic.

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