S&P 500 index rises 4.3% in February

S&P 500 index rises 4.3% in February

THE ASSOCIATED PRESS

Published — Sunday 2 March 2014

http://www.arabnews.com/news/533351

NEW YORK: After two months of trading, the stock market is back where it started.

The Standard & Poor’s 500 index rose 4.3 percent in February, the biggest gain since October 2013, helped by strong corporate earnings and a US Federal Reserve that seems to have Wall Street’s back at every turn.

But the rise in February must be taken in the context that investors spent the month making up the ground they lost in January.

“February looked a lot like January, just moving in the opposite direction,” said Scott Clemons, chief investment strategist with Brown Brothers Harriman Wealth Management.

Investors are also now staring at a stock market, while numbers-wise is basically where it was on Jan. 1, that is a lot more defensive than it was two months ago.

Utilities and health care stocks — two traditional “safe” places for investors because of their low volatility and higher-than-average dividends — are the biggest gainers so far this year.

Utilities are up 5.7 percent in 2014 and health care is up 6.6 percent.

Investor caution was also evident in the bond market, which has done reasonably well in the last two months.

The yield on the benchmark US. 10-year Treasury note has fallen from 2.97 percent to 2.65 percent in the last two months as investors returned to the relative safety of government debt.

The Barclays US Aggregate bond index, which tracks a broad mix of corporate and government bonds, is up 1.6 percent this year.

“The sentiment now is, ‘bonds may not be as bad as I originally thought,’” said Michael Fredericks, a portfolio manager of the Multi-Asset Income Fund at Blackrock.

February’s rise came in spite of several economic reports that showed the US economy slowed in the previous month.

It started with the January jobs report, which showed employers only created 113,000 jobs that month. It was far fewer than economists had expected. Other economic reports told a similar story.

Consumer confidence, manufacturing and the housing market all fell sharply in January.

Investors blamed the weather, and rightly so. Many companies, particularly retailers, said winter storms of the past two months dramatically impacted their business. Macy’s said that at one time in January, 30 percent of its stores were closed because of inclement weather.

Home Depot had a similar story.

“We don’t like to use weather as an excuse but we think we probably lost $100 million in the month of January,” Home Depot’s chief financial officer, Carol Tome, said in a conference call with investors this week.

“Atlanta was frozen, for example. It was tough here.”

Even with the economic concerns, investors were able to set aside the volatility of January for three reasons, market watchers said.

First, corporate earnings for the fourth quarter overall turned out to be pretty good. Earnings at companies in the S&P 500 index grew 8.5 percent over the same period last year, according to FactSet. Revenue growth also picked up, albeit slightly.

The Federal Reserve, once again, also came to the market’s side.

Janet Yellen, who in February took over the role as chair of the Federal Reserve, reaffirmed that the central bank plans to keep its market-friendly, low interest rate policies in place for the foreseeable future.

Lastly, weather, by its very nature, is temporary.

Spring will come, at some point, and the winter storms that have kept businesses closed and consumers away from stores will fade, investors say. All that pent-up demand will help the economy recover some of the ground lost in January and February.

“I think 70 percent, 80 percent, of the weakness we saw in January and February was weather related and we will pick up strength in the spring thaw,” said Bob Doll, chief equity strategist at Nuveen Asset Management.

Investors will have less information to work with in March than they did in February.

Earnings season is basically over. Of the companies in the S&P 500 index, 484 have reported their results, as have all 30 members of the Dow, so investors won’t have any corporate earnings news to respond to.

In the absence of company news, investors would typically look to the steady stream of economic data to find direction. However the severe winter weather of last two months is likely to make the upcoming economic reports even more difficult to interpret.

“You’re going to be able to put on spin on any report: ‘well that better than it should have been’ or ‘well, it was the weather,’” Clemons said.

“We’ll get more trustworthy numbers in April.”

On Friday, the S&P 500 rose 5.16 points, or 0.3 percent, to 1,859.45. It was the second all-time closing high for the S&P 500 in a row. The S&P 500 is now up 0.6 percent for the year.

The Dow Jones industrial average rose 49.06 points, or 0.3 percent, to 16,321.76.

The Nasdaq composite lost 10.81 points, or 0.3 percent, to 4,308.12.

Standard & Poor’s

Douglas L. Peterson was the president of Standard & Poor's, and is the president & CEO for McGraw Hill Financial Inc.

Note: Standard & Poor's is a subsidiary of McGraw Hill Financial Inc.

Lois Dickson Fitt was a director at McGraw Hill Financial Inc., a guest scholar at the Brookings Institution (think tank), married to Emmett J. Rice, is a life trustee at the Urban Institute (think tank), and Susan E. Rice’s mother.

Foundation to Promote Open Society was a funder for the Brookings Institution (think tank), the Urban Institute (think tank), and the International Rescue Committee.

George Soros was the chairman for the Foundation to Promote Open Society, and is a board member for the International Crisis Group.

Susan E. Rice was a senior fellow at the Brookings Institution (think tank), the former U.S. ambassador to UN for the Barack Obama administration, is the White House national security adviser for the Barack Obama administration, and Lois Dickson Fitt & Emmett J. Rice’s daughter.

Cass R. Sunstein is a senior fellow at the Brookings Institution (think tank), and married to Samantha Power.

Samantha Power is married to Cass R. Sunstein, the United Nations U.S. ambassador for the Barack Obama administration, was Barack Obama’s aide, a board member for the International Crisis Group, and a director at the International Rescue Committee .

Mark Malloch-Brown is a co-chair for the International Crisis Group, and was a VP for the World Bank.

Emmett J. Rice was married to Lois Dickson Fitt, a member of the Federal Reserve Board, a U.S. alternative director for reconstruction & development for the World Bank, and Susan E. Rice’s father.

Janet L. Yellen is the chair for the Federal Reserve Board, and a professor emeritus at the University of California, Berkeley.

David H. Romer is a professor at the University of California, Berkeley, and a senior fellow at the Brookings Institution (think tank).

A.W. Clausen was an honorary trustee at the Brookings Institution (think tank), and the president of the World Bank.

David Dollar is a senior fellow at the Brookings Institution (think tank), and was the country director for China and Mongolia for the World Bank.

Robert S. McNamara was an honorary trustee at the Brookings Institution (think tank), a life trustee at the Urban Institute (think tank), and the president of the World Bank.

James D. Wolfensohn was an honorary trustee at the Brookings Institution (think tank), the president of the World Bank, and is an overseer at the International Rescue Committee.

Ngozi Okonjo-Iweala was a visiting fellow at the Brookings Institution (think tank), and a managing director at the World Bank.

Hilda Ochoa-Brillembourg was the division CIO for the World Bank, and is a director at the McGraw Hill Financial Inc.

Douglas L. Peterson is the president & CEO for McGraw Hill Financial Inc., and was the president of Standard & Poor's.

Standard & Poor's is a subsidiary of McGraw Hill Financial Inc.