NEW YORK, Jan. 31 (Xinhua) -- Wall Street staged a strong start in 2013 with the Dow Jones Industrial Average and the S&P 500 logging their best January in nearly two decades.
As the prevailing words in the New York Stock Exchange goes, "as January goes, so does the rest of the year." The market is setting off the whole year on a strong note.
"There's a lot of truth to January setting the tone in terms of optimism for the year," Terry Dolan, chief executive officer of Benjamin & Jerold Brokerage, told CNBC Thursday in an interview.
But Dolan admitted that the market surprised him as it got a little bit ahead of itself.
Although the stock market retreated a little bit over the past two days after it managed to post an eight-day winning streak, the Dow is so far up 5.8 percent in January, the S&P 500 up 5.0 percent and the Nasdaq Composite Index up 4.1 percent.
The rally was triggered off when bipartisan lawmakers in Washington reached a deal to avert the so-called "fiscal cliff" at the end of December.
Both the Dow and the S&P 500 posted the strongest monthly gain since October 2011. In terms of January, the Dow made the best January performance since 1994. The S&P 500 made the best January performance since 1997 after it pierced through the significant level of 1,500 on Jan. 25 for the first time since December 2007.
However, most traders think the market has displayed some exhaustion in the latest rally and would see a little bit of adjustment.
By the closing bell on Thursday, the Dow dipped 49.84 points, or 0.36 percent, to 13,860.58. The S&P 500 dropped 3.85 points, or 0.26 percent, to 1,498.11. The Nasdaq edged down 0.18 points, or 0.01 percent, to 3,142.13.
"I wouldn't be surprised to see the market consolidating and pull back a little bit," said Kenneth Polcari, director of New York Stock Exchange Floor Operations at O'Neil Securities.
"We are up 11 percent since the lows in December with really no consolidations and pull backs. Investors should want the market to consolidate a little bit in order for it to be healthy and move higher," Polcari told Xinhua.
The Wall Street had a fairly busy January as it witnessed a string of company earnings in the fourth quarter of 2012, major economic figures and, most importantly, political events.
The U.S. Senate on Thursday gave a final approval to a short-term postponement of the U.S. federal government's debt ceiling until May 19 after the Republican-led House of Representatives passed the bill on Jan. 23. The White House had said President Barack Obama would sign it.
The bill cleared a major hurdle for the stock market. It bought more time for the Congress and the White House to negotiate a long-term solution, which eased market jitters and sent up stocks in a merry atmosphere.
Additionally, in view of the stalled economic recovery, the Federal Reserve decided to continue its ultra-loose monetary policy to bolster the U.S. economy in its latest as well as the first policy meeting in 2013.
The Fed's massive quantitative easing also boosted the market rally. "We are in a zero interest environment. There is nowhere else you can get any return of your money (than the stock market)," Weisberg told Xinhua.
However, major macroeconomic data released during the month painted a mixed picture of the U.S. economy, not as optimistic as economists had forecast.
The U.S. economy unexpectedly shrank by 0.1 percent in the fourth quarter. Initial jobless claims in the week ending Jan. 26 increased by a large margin to 368,000, which "could be harmful on the back of the GDP dip," said UBS Managing Director Arthur Cashin in an email to Xinhua.
But generally speaking the U.S. labor market continued improving since last year, with 192,000 new positions added to the private sector in January, according to data released by the Labor Department.
At the same time, the U.S. housing market has bottomed out last year and has been picking up ever since.
Recent figures showed that pending home sales in 2012 reached the highest level since 2007. New home sales were estimated to have increased 19.9 percent in 2012 from 2011. And the rising home prices of major U.S. cities in November 2012 is another sign of the growing recovery in the long-battered housing market.
Corporate earnings in the fourth quarter has been positive so far with more than two thirds of companies in the S&P 500 exceeding expectations.
When asked about whether the Dow would set a new all-time high this year, Seaport Securities trader Jason A. Weisberg said: "100 percent."
"Barring some geopolitical disaster, there's nothing to stop market from continuing to go higher," Weisberg said.
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