February Stars
The stock market is off to a solid start so far this month. Investors are cheering good earnings news and a strong labor market. Imagine that!
The market slid Wednesday — the last day of an otherwise strong January for stocks — after Federal Reserve chair Jerome Powell strongly hinted that the Fed won’t be cutting interest rates in March. But stocks are back on a winning streak so far in February. Amazing Amazon earnings and a surprise dividend announcement (plus great results) from Facebook/Instagram/WhatsApp owner Meta Platforms helped boost stocks Friday. So did a much better than expected jobs report.
Sure, a still resilient labor market and continued robust wage gains may mean that the Fed is going to remain hyper-vigilant about inflation and keep rates where they are for a little longer. But Wall Street might be looking at the bright side. Recession alarm bells continue to grow quieter.
Inflation pressures are easing, even if they aren’t receding as quickly as many had expected. But that’s not necessarily a bad thing. The continued strength of the job market means the economy is not teetering on the edge of a massive downturn. At the end of the day, would you rather have a Fed that’s drastically cutting rates in a panic because macro conditions are deteriorating or a central bank taking a gradual and cautious approach thanks to a still healthy job market?
“The Fed is not in a rush to cut rates, but they have been encouraged by the data from the last six months,” said Michelle Cluver, portfolio strategist with ETF firm Global X, in a report.
That data shows an economy that is still adding jobs and where consumers continue to spend. We’ve had strong retail sales figures and consumer confidence numbers recently. And look at corporate earnings. Strong financial results have lifted Meta to an all-time high.
But Mark Zuckerberg’s baby isn’t the only blue chip trading at record levels. Chip/AI giant Nvidia, Uber, Merck, Walmart, Caterpillar, Eli Lilly, Berkshire Hathaway, Costco, Mastercard, Hilton, Marriott, Dick’s Sporting Goods and Chipotle are some of the many other well-known stocks riding this wave of bullish momentum to hit new peaks. So it’s not just the tech sector/Magnificent Seven taking part in this rally.
Does this bull run have legs? Perhaps. As long as the economy doesn’t show significant signs of slowing down and corporate profits remain solid, then the S&P 500, which is also at an all-time high, could soon pass the 5,000 milestone. For fans of round numbers, the Dow is inching closer to 39K and the Nasdaq may soon hit a sweet 16,000.) So keep an eye on earnings. The quarterly report “season” may be soon coming to a close, but results are still on tap next week from McDonald’s, Disney, Alibaba, Ford, Spotify, Snap, CVS, Pepsi and several other well-known names.
February may be the shortest month. But if stocks keep surging like this, investors are going to wish it wouldn’t end so soon. Well, at least we get one more trading day on Thursday Feb. 29 since it’s a Leap Year.