NEW YORK — So much for the Santa Claus rally.
A run-up at the end of the 2008 that had some investors hoping the worst was over is crumbling on fear that corporate profit reports arriving this week will signal that a recovery in the economy is further off than Wall Street had hoped.
The Dow Jones industrial average fell for the fourth session Monday as oil prices tumbled and as worries about the financial sector grew. So far this year, the Dow is down 3.5 percent. Stocks are still up sharply from late November, but investors are quick to look for even subtle shifts in the market after the terrible run for stocks last year.
A drop in oil added to the pessimism Monday. Crude fell 8 percent to a new low for the year as investors bet economic weakness would curb demand. Wall Street normally welcomes falling oil as a boost for consumers who pay less to put gas in their car, but steep drops can touch off deeper fears: if oil falls too much, it is a sign that the global economy is showing no signs of improvement.
Stocks have lost ground since the Dow rose 19.6 percent from late November to the first part of 2009 — a year-end advance often referred to as a Santa Claus rally. With so many unknowns about when the economy might recover, analysts say most investors prefer to wait until they get a better read on companies’ quarterly numbers and, more important, their forecasts.
Wall Street expects fourth-quarter and full-year earnings will be particularly bleak, especially after several companies warned last week that they are being hit hard by the recession.
“I think that the biggest concern right now is the economy and whether this thing is going to get worse or it’s going to get better,” said Bernie McGinn, chief executive of McGinn Investment Management.
The Dow Jones industrial average fell 125.21, or 1.46 percent, to 8,473.97 after being down as much as 178 in the final hour of trading.
Broader stock indicators also declined. The Standard & Poor’s 500 index fell 20.09, or 2.26 percent, to 870.26, and the Nasdaq composite index fell 32.80, or 2.09 percent, to 1,538.79.
The Russell 2000 index of smaller companies fell 12.50, or 2.60 percent, to 468.80.
Analysts predict many more companies will be forced to reduce or withdraw their forecasts for the year given how much uncertainty remains about when the economy might start to recover.
“There will probably be some reductions in guidance or some watering down of guidance,” said Ken Mayland, president of ClearView Economics. “That is probably going to prove to be a bit unnerving.”
