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February started strong but ended on a bearish note as investors worried about rising inflation.
The S&P 500 went almost straight up in the first half of the month. It stalled immediately after President’s day and trended lower for the second half of the month.
The reversal followed multiple signs of higher prices and higher interest rates. It began with a shockingly producer price inflation and retail sales growth on February 17. Oil kept rallying to its highest levels in a year. Copper spiked to its highest level in almost a decade. Lumber hit its highest price ever.
| Biggest Gainers in the S&P 500 This Week | |
| Royal Caribbean (RCL) | +18% |
| Marathon Oil (MRO) | +17% |
| Vornado Realty Trust (VNO) | +15% |
| People’s United Financial (PBCT) | +15% |
| American Airlines (AAL) | +12% |
That kind of news suggested inflation might be getting out of control, potentially forcing the Federal Reserve to raise interest rates sooner than expected. Chairman Jerome Powell dismissed that concern this week, telling Congress he won’t act until the economy makes “substantial further progress.”
Twitter (TWTR) and Snap (SNAP) jumped to new highs after separately predicting strong growth. Both social-media companies are implementing key enhancements to extract more value from their platforms. They’re also benefiting from a surge of online advertising.
TWTR forecast revenue will double by 2023. Jack Dorsey’s firm is organizing content around themes and categories to boost engagemnent. It’s also focusing on rolling out upgrades more quickly and reactivating dormant users. Analysts at firms including JP Morgan, Morgan Stanley and Goldman Sachs hiked their price targets in response.
SNAP’s gains mostly resulted from improvements to its ad-selling platform.
Energy was the leading sector this week and remains the top performer this year. However there were some potentially bad news because crude oil inventories unexpectedly rose.
| Biggest Decliners in the S&P 500 This Week | |
| Viatris (VTRS) | -18% |
| Best Buy (BBY) | -15% |
| Leidos (LDOS) | -15% |
| Tesla (TSLA) | -14% |
| Verisk Analytics (VRSK) | -14% |
Financials and industrials, which also benefit from the stronger economy, were also strong. Both broke out to new all-time highs.
Consumer discretionaries led to the downside, mostly because of weakness in Tesla (TSLA). Technology also struggled as investors shifted toward reopening plays like airlines. Utilities also fell because their dividends are less attractive when interest rates increase.
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