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.
FIXED INCOME 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.
|Retail Sales ex Auto & Gas||Jan||0.30%||0.70%||0.00%||0.10%|
|PPI MOM ex Food & Energy||Jan||0.20%||0.40%||0.20%||ÿ0.1%|
|PPI YOY ex Food & Energy||Jan||1.10%||1.20%||1.60%|
|CPI MOM ex Food & Energy||Jan||0.20%||0.30%||0.20%|
|CPI YOY ex Food & Energy||Jan||2.10%||2.30%||2.20%|
|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|
|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%|
|GDP Annualized QOQ||4Q (S)||2.10%||1.90%||1.90%|
|Univ. of Mich. Sentiment||Feb (F)||96||96.3||95.7|
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