Stocks added to January’s gains during the month of February as the post-election rally continued. The S&P 500 increased 3.97% for the month, while small cap stocks, as measured by the Russell 2000, increased a more modest 1.93%. Growth stocks (+4.02%) edged out value stocks (+3.42%) for the month. Developed international stocks increased by 1.62%, while emerging market stocks increased by 3.06%.

Fixed income markets were positive in February. The yield curve flattened as yields increased for bonds with short maturities and decreased for bonds with longer maturities. The yield on the benchmark 10-year Treasury declined 9 basis points to 2.36% during the month, while the yield on the 2-year Treasury increased 3 basis points to 1.22%. The Barclays Aggregate Bond Index increased by 0.67% for the month. Credit once again outperformed as investment grade bonds increased by 1.15% and outpaced Treasuries’ increase of 0.49%. The Barclays High Yield Index again outperformed and increased by 1.46%. Municipals decreased 0.57% during the month.


The post-election rally continued as stocks increased again in February. Duplicating last month, large caps stocks continued to outpace small cap stocks and growth stocks outperformed value stocks. International equities underperformed domestic stocks, with emerging markets outperforming developed international markets.


The yield curve flattened in February, with rates at the short end of the curve increasing while declining at longer maturities. The yield on the 10-year Treasury declined 9 basis points last month to 2.36%. The Barclays Aggregate Bond Index increased in February as both Treasuries and investment grade corporates posted positive returns. High yield bonds, yet again, outpaced more interest-rate-sensitive fixed income sectors. Municipal bonds declined slightly during the month.


The Federal Open Market Committee left the federal funds rate unchanged at its two day meeting that concluded on February 1st. The next meeting will conclude on March 15th and indicators show market participants expect a ¼% rate increase. The second reading of fourth quarter GDP remained at a rate of only 1.9%. Housing was solid, with starts, permits and existing home sales all increasing from the prior month. The ISM Manufacturing and Non-Manufacturing Indices signaled continued improving business conditions, and the University of Michigan Consumer Sentiment Index continued to reflect optimism. Manufacturing was mixed, with durable goods orders rebounding and industrial production declining.

Event Period Estimate Actual Prior Revised
Nonfarm Payroll Jan 180,000 227,000 156,000 157,000
Unemployment Jan 4.70% 4.80% 4.70%
ISM Manufacturing Jan 55 56 54.7 54.5
ISM Non-Manufacturing Jan 57 56.5 57.2 56.6ÿ
Retail Sales ex Auto & Gas Jan 0.30% 0.70% 0.00% 0.10%
PPI MOM Jan 0.30% 0.60% 0.30% ÿ0.2%
PPI MOM ex Food & Energy Jan 0.20% 0.40% 0.20% ÿ0.1%
PPI YOY Jan 1.50% 1.60% 1.60%
PPI YOY ex Food & Energy Jan 1.10% 1.20% 1.60%
CPI MOM Jan 0.30% 0.60% 0.30%
CPI MOM ex Food & Energy Jan 0.20% 0.30% 0.20%
CPI YOY Jan 2.40% 2.50% 2.10%
CPI YOY ex Food & Energy Jan 2.10% 2.30% 2.20%
Industrial Production Jan 0.00% -0.30% 0.80% 0.60%
Housing Starts Jan 1,226,000 1,246,000 1,226,000 1,279,000
Building Permits Jan 1,230,000 1,285,000 1,210,000 1,228,000
New Home Sales Jan 571,000 555,000 536,000 535,000
Existing Home Sales Jan 5,550,000 5,690,000 5,490,000 5,510,000
Leading Index Jan 0.50% 0.60% 0.50%
Durable Goods Orders Jan (P) 1.60% 1.80% -0.50% -0.80%
S&P CoreLogic CS 20-City YOY Dec 5.40% 5.58% 5.27% 5.20%
Personal Income Jan 0.30% 0.40% 0.30%
Personal Spending Jan 0.30% 0.20% 0.50%
GDP Annualized QOQ 4Q (S) 2.10% 1.90% 1.90%
Univ. of Mich. Sentiment Feb (F) 96 96.3 95.7
P = Partial, S = Second, F = Final
Source: Bloomberg

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