Stocks pulled back in February as investors took profits from a big rally the previous month. Still, money returned to popular growth names like Tesla and Nvidia.
The S&P 500 dropped 2.6 percent in February. The technology-heavy Nasdaq-100 slid just 0.5 percent, outperforming the broader market for a second straight month. Energy, a classic inflationary trade, fell the most as crude oil and natural gas skidded lower.
The highs occurred on the second session of the month after Federal Reserve Chairman Jerome Powell said “disinflation” had begun. That spurred optimism about slower interest-rate hikes. Then upward revisions of older inflation data and higher readings for January hurt sentiment and lifted bond yields.
By the time February ended, both indexes pulled back to some potentially important levels. The S&P 500 returned to its 50-day moving average, while the Nasdaq retested its December highs.
Big Movers in February
| Top Gainers in the S&P 500 Last Month | ||
| Catalent (CTLT) | +28% | The contract manufacturer of pharmaceuticals may be acquired by Danaher, according to a report by Bloomberg News. |
| West Pharmaceutical (WST) | +19% | The drug maker jumped after beating estimates and authorizing a $1 billion share buyback. |
| Nvidia (NVDA) | +19% | The semiconductor company’s earnings, revenue and guidance surprised to the upside. The gaming market improved and management forecast strong demand as artificial intelligence (AI) spreads. |
| Tesla (TSLA) | +19% | The electric-vehicle maker kept advancing amid reports of market share gains and sold-out queues for new Model Ys. |
| Meta Platforms (META) | +17% | The social-media giant beat revenue estimates and announced a $40 billion buyback. |
| Top Decliners in the S&P 500 Last Month | ||
| Lumen Technologies (LUMN) | -35% | The junk-rated telecom issued weak guidance, its second straight drop following quarterly results. |
| Match (MTCH) | -23% | The online-dating stock missed estimates for earnings and revenue as usage slowed. |
| Moderna (MRNA) | -21% | The biotechnology company missed profit forecasts as demand weakened for its coronavirus vaccines. |
| DISH Network (DISH) | -21% | The satellite-television stock fell on worries about its planned wireless network. |
| Westrock (WRK) | -20% | The packaging company missed estimates and cut guidance as demand slowed. |
Sector Watch
The table below shows sector performance last month.
| Technology | +0.4% |
| Industrials | -0.9% |
| Consumer Discretionary | -2.1% |
| Consumer Staples | -2.3% |
| Financials | -2.4% |
| S&P 500 | -2.6% |
| Communications | -2.9% |
| Materials | -3.3% |
| Health Care | -4.6% |
| Real Estate | -5.9% |
| Utilities | -5.9% |
| Energy | -7% |
Key Economic Events in February
Below are some key economic events from last month.
- Fed Slows Rate Hikes, Mentions ‘Disinflation’: The Federal Reserve raised interest rates by 25 basis points, the smallest increase since March 2022. Chairman Jerome Powell also said that “disinflation” had begun. (2/1)
- Job Data Crushes Forecasts: The U.S. economy added 517,000 jobs in January, almost triple the forecast amount. Unemployment fell more than expected to the lowest level since 1969. (2/3)
- Old Inflation Data Revised Higher: The government revised the consumer price index (CPI) higher for November and December. The news erased a welcome decline in prices and contributed to fears of higher interest rates. (2/10)
- Strong Retail Sales Drive Rate Hike Fears: Retail sales increased by 3 percent in January, well ahead of estimates. While the news suggested a recession isn’t likely, it increased worries about the Fed hiking interest rates. (2/15)
What Experts Are Saying
Below are some noteworthy commentaries.
- Goldman Sachs strategist David Kostin predicted the S&P 500 will end the year little changed around 4,000. He cited high valuations, weak earnings and potential risk associated with the federal debt ceiling. (2/6)
- Deutsche Bank said major short covering from last year’s bear market is mostly finished. The report said $300 billion in downside positioning is gone, potentially removing an upside catalyst for the S&P 500. (2/8)
- Bank of America reported accelerating consumer activity in January. Credit and debit card spending rose 5.1 percent from a year ago, more than twice the growth rate in December. The bank partially attributed the growth to higher minimum wages and social security payments. (2/10)
- JPMorgan Chase strategist Mislav Matejka warned the stock market may have already reached its peak for the year. He cited higher interest rates and ongoing recession risks. (2/20)
- Morgan Stanley strategist Mike Wilson said the S&P 500 could drop to 3,000 in the first half of the year because of poor earnings and rising interest rates. He called the risk-reward “very poor,” adding that the risk premium for stocks has entered a “death zone.” (2/21)
Popular Futures Contracts in February
| Product | Current Month | Expiration | Next Month | 1-Mon% |
| S&P 500 E-Mini (@ES) | ESH23 (Mar) | 3/17/23 | ESM23 | -3% |
| Nasdaq-100 E-Mini (@NQ) | NQH23 (Mar) | 3/17/23 | NQM23 | -0.9% |
| Dow Jones E-Mini (@YM) | YMH23 (Mar) | 3/17/23 | YMM23 | -4.4% |
| Russell 2000 E-Mini (@RTY) | RTYH23 (Mar) | 3/17/23 | RTYM23 | -2% |
Newsworthy Events This Month
| Date | Event | What to Watch For |
| Tues 3/7 | Jerome Powell Testimony in Congress | Guidance on monetary policy. Will he hint at 50 basis points later this month? |
| Fri 3/10 | Non-farm payrolls | Wages & unemployment. Will January’s large payroll gain be revised lower? |
| Tues 3/14 | Inflation report | The consumer price index one hour before U.S. markets open could shape rate expectations. |
| Fri 3/17 | Quadruple witching | Trading volumes are typically heavy as futures and options contracts expire. |
| Wed 3/22 | Interest rate decision | The Fed will announce interest rate changes and issue a new quarterly “dot plot” with projections of future policy. |
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