Having reached a fresh all-time high in the middle of February, the technology-rich Nasdaq Index fell towards the end of the month. As demand for growth stocks was dampened by rising speculation over inflationary pressures and higher interest rates, the yield on the benchmark US Treasury bond rose to its highest level for over a year.
- The Fed promised to continue to support the economy
- The S&P 500 Index closed above 3,900 for the first time
- The “American Rescue Plan” passed the House of Representatives
To view the series of market updates through February, click here
Having reached a fresh all-time high in the middle of February, the technology-rich Nasdaq Index fell towards the end of the month. As demand for growth stocks was dampened by rising speculation over inflationary pressures and higher interest rates, the yield on the benchmark US Treasury bond rose to its highest level for over a year. Nevertheless, concerns were alleviated to some degree by reassurance from the Federal Reserve (Fed) that it intends to continue to support the economy. Testifying to the Senate Banking Committee, Fed Chair Jerome Powell commented: “The economic recovery remains uneven and far from complete ... The economy is a long way from our employment and inflation goals and it is likely to take some time for substantial further progress to be achieved”.
“The economic recovery remains uneven and far from complete” (Fed Chair Jerome Powell
Over February as a whole, the Nasdaq Index increased by 0.9%, while the benchmark Dow Jones Industrial Average Index climbed by 3.2%. The S&P 500 Index closed above 3,900 points for the first time during the month and ended February 2.6% higher.
During February, energy was the best-performing S&P industry sector by a substantial margin. Oil prices climbed above US$65 per barrel for the first time in over a year as unusually severe winter storms in Texas disrupted US oil production and resulted in the declaration of a major disaster in the state. Other sectors that performed particularly well included financials, industrials, and communication services. In comparison, utilities, health care, and consumer staples ended the month in negative territory.
President Joe Biden’s “American Rescue Plan” was approved by the House of Representatives at the end of February. The relief package – worth US$1.9 trillion – will progress to the Senate in March. During February, recorded deaths relating to Covid-19 in the US surpassed 500,000. Elsewhere, at his second impeachment trial, former President Donald Trump was acquitted of inciting the violence that hit the Capitol in January.
Only 49,000 jobs were added to the US economy during January, following a decline of 140,000 in December and an increase of 245,000 in November. The US has around 9.9 million jobs fewer than in February 2020. Although the unemployment rate fell from 6.7% to 6.3%, this may be attributable to a drop in the labour force as people abandoned their search for work, and the Fed believes that the true rate of unemployment is nearer to 10%.
A version of these market briefings are available to use in our newsletter builder feature. Click here
