Last week the Dow fell for the third straight week of the New Year dropping another 165 points or 1.6% and is now down 3.6% for the year. This is the first time since 1982 the market has lost ground for the first three weeks of January. Other indexes took another beating last week as well, with the NASDAQ falling 54 points, or 2.6% and now down 6.5% for the year. The S&P 500 dropped nearly 17 points, for a 1.4% weekly decline and is off 3.6% for 2005. The Russell 2000, last year's best performer, fell 1% last week and is now off 6.2% for the year.

While the Q4 earnings reporting season is still in its early stage, we are seeing a familiar theme, "a stock picker's market." Using technology companies Intel (INTC), Yahoo (YHOO) and Apple (AAPL) as examples, only Apple's stock rose after all three reported upside earnings surprises. The influence of momentum investing where one company's good news is treated as good news for all of its peers also appears to be gone, never mind if the one company's success came at the expense of those same peers.

With the 117 S&P 500 companies reporting Q4 results last week, more have missed than beat expectations. Last week's casualties included high-flying tech stocks like eBay (EBAY) and Qualcomm (QCOM), which lost 18.2% and 10% respectively after both missed EPS targets by a penny and warned that growth would slow for future quarters.

Diversity, of course, is of the utmost importance in mitigating the risk of loss in an investment portfolio. This is why the OTC Digest frequently reminds readers of this as well as the importance of doing your own research. It is becoming more obvious that investors will need to be more deliberate in stock selection in 2005 than they have been in recent years.

This week another two hundred S&P 500 companies reporting earnings will be in the spotlight. Monday big cap companies Kimberly-Clark (KMB), Union Pacific (UNP) and Altera (ALTR) reports results. Tuesday morning EMC Corporation (EMC), Merrill Lynch (MER) as well as major drug companies Johnson & Johnson (JNJ), Merck (MRK) and Schering-Plough (SCP) report results. After the close Tuesday, Electronic Arts (ERTS) and Texas Instruments (TXN) report earnings. Wednesday, blue chips Eli Lilly (LLY) and SBC (SBC) will report. Thursday morning, UPS (UPS) and Lockheed Martin (LHP) release earnings. After the close, tech companies Microsoft (MSFT), Broadcom (BRCM), PMC Sierra (PMCS) and Siebel Systems (SEBL) report. Friday morning, Procter & Gamble (PG), ChevronTexaco (CVX) Honeywell (HON) and McDonald's (MCD) will release results.

On the economic front this week, Tuesday the January Consumer Confidence will be released, as well as December Existing Home Sales. Wednesday the release of energy inventories, which should be closely watched due to the recent cold weather in the East and Midwest. Thursday the Weekly Jobless Claims and December Durable Goods numbers will be released. Friday will see the initial estimates of Q4 GDP, which is expected to show 3.5% growth.

Stay tuned!