Dow finishes with best January since 1994

Stocks are ending January with a bit of a slow bleed, but the market's performance for the month is impressive. And, if you believe that the January effect is real, the year should end higher.

The Dow Jones Industrial Average ($INDU) ended the day down 50 points to 13,861. That meant a 5.8% gain for the month and the best January performance for the blue chips since 1994 when the blue chips rose 6%. 

The Standard & Poor's 500 Index ($INX) ended the month at 1,498, down 4 points on the day. However, it gained 5% for the month, its best January since 1997. The index had climbed 1,500 during the month, a level not seen since December 2007, but fell back Wednesday and Thursday.Flat on the day at 3,142, the Nasdaq Composite Index ($COMPX) closed up 4.1% for January. It had gained 8% in January 2012, thanks in part to a 12.7% gain for Apple (AAPL).

Apple dropped 14.4% this month, its worst January since 2008, when it fell 32%, and its fourth-worst January ever. The decline was a big reason that the Nasdaq lagged the Dow and S&P 500.

The January effect, according to the Stock Trader's Almanac, posits that a higher market in January (measured by the S&P 500) leads to a higher market for the year. It's been right roughly 75% of the time since 1950. One of the few misses came in 2009, when the S&P 500 fell 8.6% in January. The market bottomed in March and soared to a 23.5% gain for the year.

Another miss came in 2001, when the S&P 500 was up 3.5% in January but fell 13% for the year. The big catalyst was the after-effects of the Sept. 11, 2001, terror attacks. The market was also slumping after the dot-com bust.

There is some optimism about U.S. stocks, built around continued strong auto sales and the hope for a continued rebound in housing in 2013.

At the same time, there is lots of worry about the market just now. The market is pricey by many measures. I see it in the 14-day relative strength indices for the major averages.

You can see the S&P 500's RSI here. It ended the day at 74.11, down from Wednesday's reading of 83.48.

Also a worry for many is the economic effects of possible "sequestration" -- the automatic spending cuts across the federal government required under the 2011 budget deal. They're supposed to kick in on March 1.

The Dow and S&P also had their both months since October 2011; the Nasdaq's gain was
its best since February 2012 when it rose 5.4%.

The Dow's winners in January were Hewlett-Packard (HPQ) and Procter & Gamble (PG), up 15.9% and 10.7%, respectively. The laggards were Bank of America (BAC) and Boeing (BA), down 2.5% and 2%, respectively.

The S&P 500 winner by far was Netflix (NFLX), up 78.9%, followed by potential buyout candidate Best Buy (BBY), which gained 37.3% and and Pitney Bowes (PBI), up 37.2%  Apple was the S&P 500 laggard, followed by Family Dollar Stores (FDO) and Monster Beverage (MNST), down 10.6% and 9.4%, respectively.

Life Technologies (LIFE), up 32%, and Dell (DELL), up nearly 31%, were the leaders of the Nasdaq-100 Index ($NDX), which tracks most of the largest Nasdaq stocks. Apple is the laggard. Eighty-five stocks in the index look to finish higher. The index was was up 2.7% for the month.

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