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Market Brief: March 2024

March 4, 2024

The Markets (as of market close February 29, 2024)

Stocks ended February on a high note as each of the benchmark indexes listed here closed up. The Nasdaq and the S&P 500 notched all-time highs, as tech shares, particularly those linked to AI, helped drive stocks. Inflation data released at the end of the month, was in line with expectations, which also supported stocks. February's gains marked the fourth straight month of advances for the S&P 500, the Dow, and the Nasdaq. For the year, the Nasdaq and the S&P 500 have risen about 7.0%, while the small caps of the Russell 2000 recouped losses from January.

Inflationary data showed price pressures remained marginally elevated, driven higher by rising prices for services. However, the rate of growth for the 12 months ended in February slowed, according to the personal consumption expenditures price index (see below), which rose 2.4%, nearing the 2.0% target set by the Federal Reserve. The U.S. economy, as measured by gross domestic product, continued to show strength in the fourth quarter of 2023 (see below). Consumer spending was solid reflecting greater confidence that inflation is coming down leading to increased spending power, especially where incomes are also rising.

The most recent inflation data showed prices inched higher in January for the second straight month. Both the Consumer Price Index (CPI) and the personal consumption expenditures price index increased in January. However, the 12-month rate for the CPI was unchanged for the year ended in January, while the PCE price index declined 0.2 percentage point.

Job growth vaulted higher in January (see below). In addition, both December and November were revised higher, adding 126,000 new jobs. Wages continued to rise, increasing 4.5% over the last 12 months. New unemployment claims decreased from a year ago, while total claims paid increased (see below).

With most of the reporting for fourth-quarter corporate earnings completed, the earnings growth rate for S&P 500 was 3.2%, marking the second straight quarter of year-over-year earnings growth, according to FactSet. The growth rate for revenue for the S&P 500 for the fourth quarter was 4.0%. While this is below both the five-year and the 10-year averages, growth in the fourth quarter marks the 13th consecutive quarter of revenue growth for the S&P 500. Eight of the 11 sectors reported revenue growth in the fourth quarter, with utilities, materials, and energy declining.

Sales of both new and existing homes increased in January, as inventory increased somewhat and mortgage rates decreased.

Industrial production ticked lower in January after no growth in December. Manufacturing declined 0.5% in January and 0.9% since January 2023. According to the latest survey from the S&P Global US Manufacturing Purchasing Managers' Index™, the manufacturing sector saw improvement in January for the first time since April 2023. The services sector saw business accelerate to a seven-month high in January.

All 11 market sectors ended January higher, led by industrials and materials. In fact, only real estate, communication services, utilities, and energy failed to advance at least 3.0%.

Bond yields gained as bond prices declined in January. Ten-year Treasury yields generally closed the month higher. The 2-year Treasury yield rose nearly 43.0 basis points to about 4.62% in February. The dollar inched higher against a basket of world currencies. Gold prices rode a topsy-turvy month, ultimately closing lower. Crude oil prices advanced in January on the heels of production cuts and shipping interruptions in the Middle East. The retail price of regular gasoline was $3.249 per gallon on February 26, $0.154 above the price a month earlier but $0.093 lower than a year ago.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark the performance of specific investments.

Eye on the Month Ahead

Economic data throughout the first two months of the year has been generally solid. However, the upward movement of inflation cooled any expectations of the Federal Reserve lowering interest rates when it meets in March.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/ Market Data (oil spot price, WTI, Cushing, OK); (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Forecasts are based on current conditions, subject to change, and may not come to pass. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities and other bonds fluctuates with market conditions. Bonds are subject to inflation, interest-rate, and credit risks. As interest rates rise, bond prices typically fall. A bond sold or redeemed prior to maturity may be subject to loss. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

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