Market Insights

Stocks just rose for the fourth straight month, powered by strong earnings and economic growth.

The S&P 500 climbed 5.2 percent between December 31 and February 29. Two-thirds of the index’s members advanced, along with every major sector. The Nasdaq-100 rose 5.2 percent and the Dow Jones Industrial Average moved 2.2 percent higher.

Strong earnings from megacap growth stocks like Meta Platforms (META), Amazon.com (AMZN) and Nvidia (NVDA) helped drive the big moves. (See the chart below.) However, non-tech companies like industrials and retailers also rallied after beating estimates. That embrace of “cyclical” stocks may suggest that investors see economic growth driving the market higher.

Several reports last month potentially confirm that view. S&P Global Research raised its forecast for economic growth and the Conference Board abandoned its recession call. Strategists at firms like UBS and Barclays raised their estimates, in part because they expect greater earnings growth. Separately, FactSet reported that stocks are rallying more than normal when earnings beat estimates. That’s a potential sign that investors are optimistic and expect further improvement.

The S&P 500 has made new 52-week highs in 11 of the last 12 weeks, according to TradeStation data. It’s remained above its 21-day exponential moving average (EMA) since breaking to all-time highs on January 19. Its nine-day rate of change has also remained positive during that time, which may reflect a bullish trend.

March could be quieter because there are fewer earnings. However there are some big economic events with Federal Reserve Chair Jerome Powell testifying on Capitol Hill next week. The central bank also releases its important interest-rate forecast (“dot plot”) on March 20. See the table below for more details.

Big Movers in February

Sector Watch

Key Economic Events in February

Below are some key economic events from last month.

• Job growth, wages surge past expectations: The U.S. added 353,000 jobs in January and wages increased by 0.6 percent. Both readings were about twice the forecast amounts. (2/2)
• Inflation runs hot: The Consumer Price Index (CPI) rose 0.3 percent in January, above the 0.2 percent estimate. Costs for shelter, food, insurance and medical care drove the increase. (2/13)
• Retail sales fall more than expected: Retail sales declined by 0.8 percent in January, missing estimates for a 0.1 percent drop. It was the first time in seven months that sales missed projections. Economists said bad weather may have caused the shortfall. (2/15)
• GDP growth revised lower: The Commerce Department lowered its estimate for fourth-quarter economic growth from 3.3 percent to 3.2 percent, noting smaller inventory growth. Consumer spending was stronger than initially thought. (2/28)

What Experts Are Saying

Below are some noteworthy commentaries:

• The Nasdaq-100 could double or triple over the next three years because of AI, Gene Munster of Deepwater Asset Management told CNBC. He added that stocks are in the early stages of a bubble forming. Munster expects further expansion as multiples increase. (2/14)
• UBS raised its price target on the S&P 500 from 5,145 to 5,400 based on better-than-expected earnings. The bank sees opportunity in health care and financials. (2/20) Barclays hiked its estimate from 4,800 to 5,300, but sees potential for a move to 6,050 if big tech earnings are strong. (2/27)
• The Conference Board no longer expects a recession because six of the 10 leading economic indicators in its index have turned positive. (2/20). S&P Global Ratings also increased its forecast for economic growth this year from 1.5 percent to 2.4 percent. (2/21)
• Goldman Sachs expects bullish sentiment to widen as hedge funds allocate capital to momentum strategies. The analysis considered surveys, derivatives pricing and the positive macroeconomic backdrop. (2/26)
• Nvidia’s most recent earnings report may open the door to a new “roaring 20s,” according to Jason Draho of UBS Global Wealth Management. He said accelerating AI investment could potentially boost labor productivity, increasing the economy’s productive capacity. (2/26)

Popular Futures Contracts in February

Newsworthy Events This Month