Another Record for Stocks in February on Earnings, Economic Growth

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Stocks just rose for the fourth straight month, powered by strong earnings and economic growth.

The S&P 500 climbed 5.2 percent between December 31 and February 29. Two-thirds of the index’s members advanced, along with every major sector. The Nasdaq-100 rose 5.2 percent and the Dow Jones Industrial Average moved 2.2 percent higher.

Strong earnings from megacap growth stocks like Meta Platforms (META), Amazon.com (AMZN) and Nvidia (NVDA) helped drive the big moves. (See the chart below.) However, non-tech companies like industrials and retailers also rallied after beating estimates. That embrace of “cyclical” stocks may suggest that investors see economic growth driving the market higher.

S&P 500, daily chart, showing key events and technical indicators.

Several reports last month potentially confirm that view. S&P Global Research raised its forecast for economic growth and the Conference Board abandoned its recession call. Strategists at firms like UBS and Barclays raised their estimates, in part because they expect greater earnings growth. Separately, FactSet reported that stocks are rallying more than normal when earnings beat estimates. That’s a potential sign that investors are optimistic and expect further improvement.

The S&P 500 has made new 52-week highs in 11 of the last 12 weeks, according to TradeStation data. It’s remained above its 21-day exponential moving average (EMA) since breaking to all-time highs on January 19. Its nine-day rate of change has also remained positive during that time, which may reflect a bullish trend.

March could be quieter because there are fewer earnings. However there are some big economic events with Federal Reserve Chair Jerome Powell testifying on Capitol Hill next week. The central bank also releases its important interest-rate forecast (“dot plot”) on March 20. See the table below for more details.

Big Movers in February

Top Gainers in the S&P 500 Last Month
Constellation Energy (CEG)+38%The electric-utility stock beat estimates and raised guidance. It benefited from tax credits because of its zero-emission nuclear plants.
Ralph Lauren (RL)+29%The retailer’s earnings beat estimates as strong comparable sales boosted margins.
Nvidia (NVDA)+29%The chip designer became the market’s third most-valuable company after growing AI demand fueled strong results.
Meta Platforms (META)+26%Cost cuts boosted profits, establishing the social-media giant above $1 trillion in capitalization. META also initiated a quarterly cash dividend.
Quanta Services (PWR)+24%The engineering firm beat estimates amid strong demand for energy-transition and infrastructure spending.
Source: TradeStation Data
Top Decliners in the S&P 500 Last Month
Paramount Global (PARA)-24%Takeover speculation lifted the media company in January, but it fell last month as hopes of a deal faded.
Charter Communications (CHTR)-21%The broadband company missed estimates by a wide margin as subscribers defected.
Insulet (PODD)-14%The diabetes-testing company’s guidance for the first quarter was lower than forecast.
Amgen (AMGN)-13%The pharmaceutical company’s results beat estimates, but analysts worried about the growth potential of weight-loss drugs in its pipeline.
Warner Bros. Discovery (WBD)-12%The media company’s revenue missed estimates on weak advertising sales.
Source: TradeStation Data

Sector Watch

Consumer Discretionary+7.9%
Industrials+7.1%
Materials+6.5%
S&P 500+5.2%
Technology+4.7%
Communications+4.6%
Financials+4.1%
Energy+3.1%
Healthcare+3.1%
Real Estate+2.5%
Consumer Staples+2%
Utilities+1.1%
Source: TradeStation Data

Key Economic Events in February

Below are some key economic events from last month.

  • Job growth, wages surge past expectations: The U.S. added 353,000 jobs in January and wages increased by 0.6 percent. Both readings were about twice the forecast amounts. (2/2)
  • Inflation runs hot: The Consumer Price Index (CPI) rose 0.3 percent in January, above the 0.2 percent estimate. Costs for shelter, food, insurance and medical care drove the increase. (2/13)
  • Retail sales fall more than expected: Retail sales declined by 0.8 percent in January, missing estimates for a 0.1 percent drop. It was the first time in seven months that sales missed projections. Economists said bad weather may have caused the shortfall. (2/15)
  • GDP growth revised lower: The Commerce Department lowered its estimate for fourth-quarter economic growth from 3.3 percent to 3.2 percent, noting smaller inventory growth. Consumer spending was stronger than initially thought. (2/28)

What Experts Are Saying

Below are some noteworthy commentaries:

  • The Nasdaq-100 could double or triple over the next three years because of AI, Gene Munster of Deepwater Asset Management told CNBC. He added that stocks are in the early stages of a bubble forming. Munster expects further expansion as multiples increase. (2/14)
  • UBS raised its price target on the S&P 500 from 5,145 to 5,400 based on better-than-expected earnings. The bank sees opportunity in health care and financials. (2/20) Barclays hiked its estimate from 4,800 to 5,300, but sees potential for a move to 6,050 if big tech earnings are strong. (2/27)
  • The Conference Board no longer expects a recession because six of the 10 leading economic indicators in its index have turned positive. (2/20). S&P Global Ratings also increased its forecast for economic growth this year from 1.5 percent to 2.4 percent. (2/21)
  • Goldman Sachs expects bullish sentiment to widen as hedge funds allocate capital to momentum strategies. The analysis considered surveys, derivatives pricing and the positive macroeconomic backdrop. (2/26)
  • Nvidia’s most recent earnings report may open the door to a new “roaring 20s,” according to Jason Draho of UBS Global Wealth Management. He said accelerating AI investment could potentially boost labor productivity, increasing the economy’s productive capacity. (2/26)

Popular Futures Contracts in February

ProductCurrent
Month
ExpirationNext
Month
1-Mon%
S&P 500 E-Mini (@ES)ESH24 (Mar)3/15/24ESM24+4.7%
Nasdaq-100 E-Mini (@NQ)NQH24 (Mar)3/15/24NQM24+4.8%
Dow Jones E-Mini (@YM)YMH24 (Mar)3/15/24YMM24+1.9%
Russell 2000 E-Mini (@RTY)RTYH24 (Mar)3/15/24RTYM24+4.9%
Source: TradeStation Data

Newsworthy Events This Month

DateEventWhat to Watch For
Wed 3/6Congressional testimony by Jerome PowellComments on interest rates and inflation before policy meeting on March 20
Fri 3/8Employment reportHiring and wage trends in February
Tue 3/12Consumer price index (CPI)Inflation trends
Mon 3/18Nvidia GPU Technology Conference (18-21 March)AI news and developments
Wed 3/20Fed interest rate decision with economic projections“Dot plot” will reflect central bank’s plans for potential rate cuts this year.
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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.