Monthly Market Recap
Equities continued their positive trend in February as major indexes posted monthly gains. The Dow recorded 12 record highs in February and posted a monthly gain of 4.77% — its best month since November. The S&P 500 (3.72%) and Nasdaq (3.75%) each climbed over 3.50% for the month. For the S&P 500, February marked the best monthly gain since last March. Since the presidential election, investors have continued to pour money into stocks, likely in anticipation of tax cuts and policies intended to boost corporate earnings. The yield on 10-Year Treasuries fell as bond prices increased with higher demand.
- Employment – Growth in the employment sector remained steady in January. According to the Bureau of Labor Statistics, there were 227,000 new jobs added in January, up from a revised December total of 157,000 and well above the 2016 average of 187,000. In January, employment trended up in retail trade, construction, and financial activities. The unemployment rate inched up 0.1 percentage point to 4.8%.
- FOMC/interest rates – In January, the FOMC maintained the target range for the federal funds rate at 0.50%-0.75%. However, continued strength in the labor market and consumer spending, which has sent inflation closer to the Fed target rate of 2.0%, will substantiate further rate increases, with the next one possibly coming as early as March.
GDP/budget – According to the “second” estimate of the GDP from the Bureau of Economic Analysis, fourth-quarter 2016 gross domestic product grew at an annualized rate of 1.9% (the same rate as the first estimate). The growth rate for the third-quarter GDP was 3.5%. Real GDP increased 1.6% in 2016 (that is, from the 2015 annual level to the 2016 annual level), compared with an increase of 2.6% in 2015. Factors driving the downward movement of the GDP include deceleration in exports, an acceleration in imports (a negative in the GDP calculation), and a downturn in federal government spending.
The Month Ahead
The announcement following the Federal Open Market Committee’s March meeting will be a focus for investors. Judging from the minutes following the Committee’s February meeting, an interest rate increase in March is definitely on the table.
Source: Forefield Financial Communications.
Notes: The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. Market indexes listed are unmanaged and are not available for direct investment.