U.S. stocks fell on Friday after news that the economy shrank at its fastest pace in nearly 27 years while downbeat data and earnings reinforced apprehension about the plight of consumers and manufacturers.

Highlighting the slowdown in spending, Procter & Gamble Co , the world’s largest consumer products maker, reported profit that missed expectations and was the latest company to cut its full-year earnings forecast, citing weaker demand.

P&G was the Dow’s biggest drag, down 3.9 percent at $55.95.

U.S. gross domestic product for the fourth quarter fell at a 3.8 percent annual rate but beat analysts’ expectations, providing a short-lived relief rally right after the open. In a bad sign for corporate profits, the report showed stocks of unsold goods rose, compared to drops in recent quarters.

Investors were already fretting over the health of the economy following dismal jobless claims and durable goods data on Thursday and had been expecting a 5.4 percent contraction in GDP, according to a Reuters poll.

“This is one where the headline is clearly better than people were expecting,” said Nigel Gault, chief U.S. economist, Global Insight in Lexington, Massachusetts.

“But underneath, those details do not look healthy and it’s telling us firms were not cutting production as fast as their sales were falling. And that’s a bad sign for what’s going to happen in the first quarter because it says they have got to work off these excess inventories.”

The Dow Jones industrial average was down 81.08 points, or 0.99 percent, at 8,067.93. The Standard & Poor’s 500 Index gave up 9.71 points, or 1.15 percent, at 835.43. The Nasdaq Composite Index was off 14.48 points, or 0.96 percent, to 1,493.36.

The declines threatened to send stocks to their worst January in nearly two decades, with the S&P 500 down 7.2 percent on the year thus far. January performance traditionally serves as a harbinger for stocks for the rest of the year.

Data showed U.S. consumer confidence rose to a four-month high in January but improved less than expected, while Chicago area business activity shrank more severely than anticipated.

Capping off a week of announcements of massive job losses, Caterpillar Inc (CAT) said it was laying off a further 2,110 people, adding to nearly 20,000 jobs the heavy equipment maker slashed on Monday.

Caterpillar was down 3.6 percent at $30.71.

The energy sector was the lone group on the upside on the S&P 500 after results from Chevron and Exxon Mobil topped Wall Street’s expectations.

The oil producers were also the Dow’s biggest lifts, with Chevron up 1.2 percent at $71.46 and Exxon losing 1.2 percent to $77.91.

NEW YORK, Jan 30 (Reuters)