Isn't October supposed to be the volatile month for stocks? Clearly, this market never got the memo.
As February comes to a close, investors looked back on a month filled with wild swings in value, earnings power and the threat of interest rate hikes. These are the biggest market-moving developments month that was short on days, but certainly not lacking drama.
After January closed out as the best month for stocks since March 2016, February gave investors one rude awakening. On Monday, Feb. 5, the Dow Jones Industrial Average gave back a whopping 1,175 points in its biggest single-day point decline ever. The trading session saw the blue-chip index slip 4.6%. The S&P 500 also tumbled 4.1% on Feb. 5. But it at first seemed that was just the tip of the ice berg.
In February's 19 trading sessions, the S&P spent five of the first six in the red. By the closing bell Feb. 8, the Dow had seen two 1,000-point single-day declines in February. At the same time, bond yields surged as they priced in the threat of inflation. By Valentine's Day on Feb. 14, the 10-year benchmark Treasury note yielded 2.91%, which at that time was a four-year high.
So what caused the major selloff? Most investors pointed to the threat of inflation that came following consumer pricing statistics released early in the month. A healthy jobs report didn't help either - this was a month in which investors reacted negatively to good economic news. Investors became concerned that a strong economy thriving on the tailwinds of tax reform could overheat, necessitating Federal Reserve intervention. Wall Street was also faced with a new Fed Chief in Jerome Powell, who brought with him uncertainty regarding the pace of interest rate hikes.
As the closing bell rang Feb. 28, the Dow was down about 1,050 points, or about 4%, for the month. The S&P and the Dow had their worst month in two years and the Dow snapped its longest monthly win streak since 1959. This was the worst February for stocks since 2009.
But Then Stocks Soared
The stock market came back with a vengeance following early-February losses. Despite February's record-setting losses, the rally that took place in the market following sharp losses is nothing short of impressive.
The Dow logged eight days of triple-digit gains in February. The S&P was positive for 10 sessions. The Nasdaq pared earlier dramatic losses and ended February down about 1%. After losing their gains year-to-date in the early-February selloff, stocks moved boldly back into positive territory year-to-date toward the middle of the month.
The Dow is up about 1.3% for the year, the S&P is up about 1.5% for the year and the Nasdaq is up about 5.4% for the year.
Some Stocks Killed It
Earnings season continued with strength in February, driving a number of stocks higher. In a late-February note, FactSet said 90% of S&P 500 companies had reported financials for the quarter. Of those, 74% reported positive earnings surprises and 78% have reported positive sales surprises. FactSet added that if 78% is the final tally for positive sales surprises once all companies report, it will mark the highest percentage since FactSet started monitoring the metric in 2008.
The S&P has so far tallied a blended earnings growth rate of 14.8%, which as of publication was the highest since 2011. At the end of 2017, analysts forecasted just 11% growth for the fourth quarter being reported now.
Some of the best performers on the stock market for February were unsurprising. Apple Inc. (AAPL) is up 6% in the last month. Netflix Inc. (NFLX) has rallied 10% in a month. Amazon.com Inc. (AMZN) pushed higher 9% for the month.
There were also a number of stocks that fell harder than the rest in the downturn only to ourperform the pack on the way back up. Under Armour (UAA) stock fell 10% from Jan. 26 through Feb. 8. But since the market close on Feb. 8, Under Armour is up 31%. The same goes for U.S. Steel Corp. (X) . It was down 17% from Jan. 26 through Feb. 8, but has since rallied 31%.
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