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A Sign Of Things To Come

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by Megan Barnett
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Jan 02 2008 12:00am EDT

A Sign of Things to Come?

The first trading day of 2008 was a grim one for investors. The Dow dropped 220.86 points, or 1.7 percent, to end its worst first day of the year since 1983. Taking a step back to look at the broader market, things weren't much better. Today was the sixth-worst opening day for the S&P 500 Index ever. It shed 1.4 percent.

Investors love predictive indicators. What does a poor opening day mean for the stock market's year? Not much, as it turns out. In only two of the five years with the worst opening day sell-offs, the S&P ended the year in negative territory (1932, 2001). The other three years saw quite nice gains.

Conversely, a strong opening day seems more likely to foretell a happy story for the year. Only once in the six years with the strongest opening days did the S&P fall by the end of the year (1931). From S&P:

Opening Day % Change Annual % Change in Index
1/2/1932-3.7-15.2
1/2/2001-2.8-13.0
1/2/1980-2.0+25.8
1/3/1949-1.6+10.3
1/3/1983-1.6+17.3
1/2/2008-1.4?

Opening Day % Change Annual % Change in Index
1/4/1988+3.6+26.7
1/2/1931+3.3-47.1
1/2/2003+3.3+26.4
1/2/1975+2.4+31.6
1/2/1942+2.3+12.4
1/3/1955+2.1+26.4

 

by Megan Barnett

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