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Mar 02, 2023

February 2023

Stocks took a breather in February after a strong start to the year. The NASDAQ dipped 1%, the S&P 500 fell 2.4%, and the Dow Jones Industrial Average sank 3.9% following the conclusion of Q4 2022 earnings season. February was the second straight month in which the NASDAQ outperformed other major US indices, signaling renewed strength in growth stocks. The small-cap Russell 2000 index fell 1.7%, also outperforming the large-cap S&P 500 and blue-chip Dow Jones indices for the second month in a row.

Technology was the only positive sector in February, rising 0.4%. Energy was at the bottom of the pack with a 6.9% decline as oil prices fell in February. Utilities had the second-worst performance in February, falling 5.9% as many utility stocks, often regarded as bond substitutes, face growing competition from US treasury yields.

US Unemployment fell to its lowest level in over 50 years and labor force participation increased month-over-month. Inflation came in about flat at 6.41% while the Consumer Price Index and Personal Spending logged their highest monthly advances in several months. The US ISM Manufacturing PMI also bucked eight straight monthly declines in February. Lastly, the housing market continued its cooldown, as MoM US Existing Home Sales fell for the 12th-straight month and the US median existing home price dipped another 2%.

US Treasury yields eclipsed 5% for the first time since July 2007. Rates on the 6-Month and 1-Year Treasury Bills at the end of February were 5.17% and 5.02%, respectively. The 10-Year Rate was the lowest on the yield curve for the second straight month, but its 3.92% yield as of February’s end represents an 11.4% month-over-month increase.

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