U.S. stocks closed lower on the final trading session of February on Friday amid lackluster data and oil gains, but still ended the month with their largest monthly percentage gains since 2011.
In the second month of the year, the Dow Jones Industrial Average reported a gain of 5.64%, its biggest monthly rise since January 2013, while the S&P 500 advanced 5.49%, its best monthly performance since October 2011. The Nasdaq Composite grew 7.08% to get closer to the 5000 mark which was last time achieved nearly 15 years ago.
“February was nothing short of spectacular,” said Art Hogan, chief market strategist at Wunderlich Securities. He noted how American equities rebounded from weak performance in January, Greece unease and dull earnings.
“Up 7 percent (in February), the Nasdaq was really phenomenal in and of itself,” he said.
Stocks performed much better in February than a lackluster January, when U.S. stocks recorded their worst monthly declines in a year, with the Dow retreating 3.7% and the S&P 500 moving down 3.1%.
“There’s more applauding going on for U.S. stocks and there’s more excitement building up around the market,” said Tony Scherrer, Smead Capital Management’s director of research, which manages roughly $1.3 billion, referring to the February rally in U.S. equities.
This excitement seems visible particularly in the tech-heavy Nasdaq, though Mr. Scherrer said he was cautious about a few stocks leading the index higher.
“Some of the young tech, the conceptual tech kind of stocks, we think they’re getting rewarded with too high of multiples, and that there’s too much excitement around them,” he said, adding that his firm is upbeat on some “old tech” names on the basis of lower price-to-earnings valuations and strong cash flows.
On Friday, the Dow retreated 81.72 points or 0.4%, to end the day at 18132.70. The S&P 500 dropped 6.24 points or 0.3% to settle at 2104.50 and the Nasdaq Composite moved down 24.36 points or 0.5% to reach at 4963.53.
In economic front, the second reading on the U.S. gross domestic product showed slower growth than initially thought in the fourth quarter.
Separately, The Chicago Purchasing Managers Index fell to its worst level since July 2009, moving down to 45.8 in February as compared to January’s 59.4. The reading suggests the business activity is contracting.
“The data over the last two months has been more mixed on a macroeconomic front, but as stock investors you’re not thriving off of GDP numbers,” said Stephen Freedman, head of cross-asset strategy at UBS Wealth Management Americas, which manages roughly $1 trillion. “Earnings ultimately are what matters.”
With 485 of the S&P 500 companies having reported fourth-quarter earnings so far, the overall earnings growth rate in Q4 ’14 S&P 500 earnings stands at 3.7%, higher from the estimate of 1.7% at the end of the fourth quarter, according to FactSet. This earnings season we saw strong earnings from technology and retail companies.
Other factors that contributed in stocks rally in February include stabilization in oil prices as well as decreased global uncertainty, namely worries related to a Greek exit from the eurozone.
In February, consumer discretionary stocks marked the best performance in the S&P 500, rising 8.5% due in part to benefits from lower oil prices. Technology stocks were ranked second in the top monthly performers.
In other markets, the yield on the U.S. 10-year Treasury note came in under 2 percent. The U.S. dollar turned higher versus major world currencies. Gold futures jumped $3.00 or 0.25 percent to move at $1,213.10 on the New York Mercantile Exchange, but suffered a 5 percent fall for the month. Crude-oil futures added 3.3% to reach at $49.76 a barrel.
