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MARKET MONTH: FEBRUARY 2012

February 29, 2012

MARKET MONTH: FEBRUARY 2012

The Markets

The Nasdaq came on strong for the second month in a row (though at a somewhat slower pace than in January) as it briefly hit 3,000 for the first time since 2000. An agreement on a second Greek bailout helped the Global Dow continue to heal; its year-to-date performance is now second only to the Nasdaq’s. Meanwhile, the Dow Industrial Average finally managed to close above the 13,000 level–at least for one day–and recorded its fifth straight month of gains, while the Russell 2000 lagged the large caps for the month.

After regaining some of the ground it lost late last year, gold celebrated the month’s extra day by falling to just over $1,700. Fueled in part by tensions with Iran, oil prices soared as much as 12% at one point before ending the month at $107 a barrel, raising concern about prices at the pump and the potential impact on economic recovery. The euro hit $1.34 at one point–its highest level since Thanksgiving–as eurozone interest rates stabilized a bit, while the yield on 10-year Treasuries nudged upward.

 

Market/Index 2011   Close Prior   Month As   of 2/29 Month   Change YTD   Change*
DJIA 12217.56 12632.91 12952.07 2.53% 6.01%
Nasdaq 2605.15 2813.84 2966.89 5.44% 13.89%
S&P   500 1257.60 1312.40 1365.68 4.06% 8.59%
Russell   2000 740.92 792.82 810.94 2.29% 9.45%
Global   Dow 1801.60 1915.01 1997.44 4.30% 10.87%
Fed.   Funds .25% .25% .25% 0 bps 0 bps
10-year   Treasuries 1.89% 1.83% 1.98% 15 bps 9 bps

 

 

The Month in Review

•The Bureau of Labor Statistics said U.S. payrolls added 243,000 jobs in January, bringing the unemployment rate down to 8.3%. It was the fifth straight month of lower unemployment.

•The U.S. economy grew at an annual rate of 3% in Q4 2011, a more rapid pace than the 2.8% initial estimate. Once again, the Bureau of Economic Analysis said inventories were a major contributor, though consumer spending and commercial construction also were up.

•Eurozone finance ministers agreed to the terms of a second bailout for Greece, worth €130 billion, after the country’s coalition government approved additional austerity measures and private bondholders (i.e., banks) agreed to swap their Greek sovereign bonds for ones worth almost 54% less. However, the G-20 nations postponed committing more resources for the International Monetary Fund’s contribution to the bailout effort, saying they want to see how European rescue efforts progress.

•Moody’s slapped new credit rating downgrades and/or negative outlooks on several European countries, including the United Kingdom and France, because of their exposure to the more troubled countries’ debt.

•Congress agreed to extend through the end of 2012 both the 2% payroll tax reduction and long-term unemployment benefits.

•Though housing starts, new residential construction, and home resales all improved during the month–they were up 1.5%, 1.5%, and 4.3% respectively–the good news didn’t extend to home prices. The S&P/Case-Shiller national index of home prices hit its lowest point since its mid-2006 peak.

•Manufacturing data was mixed. The Commerce Department said durable goods orders fell, mostly because of a drop in orders for commercial aircraft, but the Fed’s surveys of the New York and Philadelphia regions hit their highest levels in months.

•Inflation at the wholesale level rose 1% in January, putting the rate for the past 12 months at 4.1%. However, not all the increases made their way to the consumer level; according to the Bureau of Labor Statistics, consumer inflation was up 0.2% for the month and 2.9% for the last year. Meanwhile, the Commerce Department said retail sales rose a modest 0.4% in January.

Eye on the Month Ahead

Any suggestion of bailout package problems that might spell trouble for the Greek bond payments due March 20 could spook global markets. Investors also will watch to see if leadership in the equities markets remains with companies that benefit most from the early days of a recovery, and whether that recovery will pick up steam.

Key dates and data releases: auto sales, personal income/spending, U.S. manufacturing, construction spending (3/1); factory orders, U.S. services sector (3/5); labor productivity/costs (3/7); unemployment/payrolls, balance of trade (3/9); retail sales, Federal Open Market Committee announcement (3/13); import/export prices (3/14); wholesale inflation, international capital flows, Philadelphia Fed/Empire State manufacturing surveys (3/15); consumer inflation, industrial production, quadruple witching options expiration (3/16); housing starts (3/20); home resales (3/21); new home sales (3/23); home prices (3/27); durable goods orders (3/28); final Q4 GDP (3/29); personal income/spending (3/30).

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.  

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

 

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