The bears regained their foothold on the stock market in early January. Most Wall Street prognosticators were perplexed as they had predicted that January would lead the stock market with an opening rally that would carry forward throughout 2005.

Their rationale was based on the thesis that  the U.S. economy would continue to grow robustly throughout 2005 and beyond.

In addition, they predicted that the Iraqi election on January 30 would certainly be successful, laying out the framework for democracy to prevail in  Iraq and the middle east.

Stock market investors however, were less optimistic and sober throughout January, and as such, most major stock market indexes continued to decline in the first few weeks of January.

There is an old adage on Wall  Street "as January goes there goes the year". What this

means is that  if January starts off in negative territory for the stock market, usually the year finishes as a loser for most stock market investors.

The prestigious Dow Jones Industrial Average (DJ-30) which was up a scant 3.5% for  all of 2004, lost all its gains by the third week of January.

The daily carnage in Iraq  leading up to the January 30th election day, did little to calm stock market investors throughout January.

Even as the stellar profit reports for the fourth quarter of 2004 were released for many publicly traded companies, many stocks  plummeted in price as investors were unsatisfied with the their profit growth or predictions for the future.


The bond market remained range bound throughout January with long-term yields near a six month low.  Bond investors waited to see what the

Federal Reserve (Fed) would do at their next regular scheduled meeting on February 2nd.

You would think that the Fed's actions of raising interest rates for the sixth time in a row on February 2nd would have spooked the stock market bulls, but it didn't.

The bulls maintained their resolve throughout February as most major stock market indexes continued their ascent throughout that month.

Normally stock market investors turn bearish when the Fed goes on their campaign to raise short-term interest rates. Higher borrowing costs for consumers and businesses is not an elixir for corporate profits to grow.


Moreover, usually long term interest rates follow short-term interest rates when they rise or fall.
However, since the Fed started to raise short-term interest   rates