Market Insights

Stocks pulled back in February as investors took profits from a big rally the previous month. Still, money returned to popular growth names like Tesla and Nvidia.

The S&P 500 dropped 2.6 percent in February. The technology-heavy Nasdaq-100 slid just 0.5 percent, outperforming the broader market for a second straight month. Energy, a classic inflationary trade, fell the most as crude oil and natural gas skidded lower.

The highs occurred on the second session of the month after Federal Reserve Chairman Jerome Powell said “disinflation” had begun. That spurred optimism about slower interest-rate hikes. Then upward revisions of older inflation data and higher readings for January hurt sentiment and lifted bond yields.

By the time February ended, both indexes pulled back to some potentially important levels. The S&P 500 returned to its 50-day moving average, while the Nasdaq retested its December highs.

Big Movers in February

Sector Watch

The table below shows sector performance last month.

Key Economic Events in February

Below are some key economic events from last month.

• Fed Slows Rate Hikes, Mentions ‘Disinflation’: The Federal Reserve raised interest rates by 25 basis points, the smallest increase since March 2022. Chairman Jerome Powell also said that “disinflation” had begun. (2/1)
• Job Data Crushes Forecasts: The U.S. economy added 517,000 jobs in January, almost triple the forecast amount. Unemployment fell more than expected to the lowest level since 1969. (2/3)
• Old Inflation Data Revised Higher: The government revised the consumer price index (CPI) higher for November and December. The news erased a welcome decline in prices and contributed to fears of higher interest rates. (2/10)
• Strong Retail Sales Drive Rate Hike Fears: Retail sales increased by 3 percent in January, well ahead of estimates. While the news suggested a recession isn’t likely, it increased worries about the Fed hiking interest rates. (2/15)

What Experts Are Saying

Below are some noteworthy commentaries.

• Goldman Sachs strategist David Kostin predicted the S&P 500 will end the year little changed around 4,000. He cited high valuations, weak earnings and potential risk associated with the federal debt ceiling. (2/6)
• Deutsche Bank said major short covering from last year’s bear market is mostly finished. The report said $300 billion in downside positioning is gone, potentially removing an upside catalyst for the S&P 500. (2/8)
• Bank of America reported accelerating consumer activity in January. Credit and debit card spending rose 5.1 percent from a year ago, more than twice the growth rate in December. The bank partially attributed the growth to higher minimum wages and social security payments. (2/10)
• JPMorgan Chase strategist Mislav Matejka warned the stock market may have already reached its peak for the year. He cited higher interest rates and ongoing recession risks. (2/20)
• Morgan Stanley strategist Mike Wilson said the S&P 500 could drop to 3,000 in the first half of the year because of poor earnings and rising interest rates. He called the risk-reward “very poor,” adding that the risk premium for stocks has entered a “death zone.” (2/21)

Popular Futures Contracts in February

Newsworthy Events This Month

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