CEO Sightings

February Ends with Record Highs: Markets Surge on Strong Earnings and Economic Data

By:JJ Kinahan

Tech titans propelled February gains with Nvidia and Meta leading the charge amid enthusiasm for AI and Crypto

  • The markets closed February at record highs, driven by strong earnings and economic data despite concern about inflation.
  • Tech giants like Nvidia and Meta led the February gains, reflecting investors’ enthusiasm for AI and crypto.
  • Caution is warranted amid signs of market concentration risk, potential problems with commercial real estate and caution inspired by Apple's downgrade.

February concluded with record highs for the markets. The S&P 500 rose by 0.5% yesterday, marking a 6% gain for the month, while the Nasdaq Composite climbed 0.9%, also ending the month with a 6% increase. These gains reflect a consistent upward trend, with both indices closing higher in nine of the past twelve months.

The recent market surge has been driven by positive earnings and economic data, indicating a robust economy without significant inflationary pressures. First-quarter S&P 500 earnings rose by 3.9%, with stocks trading at 20.5 times forward-looking earnings, slightly above historical averages.

Individual stocks

Notable performers in February include Nvidia (NVDA), advancing by 29%, Advanced Micro Devices (AMD) up nearly 15%, Meta Platforms (META) gaining almost 26% and (AI) soaring by 48%. The market's focus on artificial intelligence and crypto, particularly the 45% surge by Bitcoin's 45% surge last month, underscores investor interest in alternative assets amid stretched market valuations.

Despite the optimism, cautionary signs emerge. Stock in New York Community Bancorp (NYCB) plummeted 25% premarket after it revealed material weaknesses in its loan review process, highlighting ongoing concern in commercial real estate lending. Additionally, market valuations and concentration risk pose potential challenges, reminiscent of the dot-com era's excesses.

The Goldman Sachs decision to downgradeof stock in Apple (AAPL) from its top buy-rated conviction list signals a shift in investor perceptions of safety stocks, with companies like Microsoft (MSFT) gaining prominence. Meanwhile, chipmakers like Nvidia (NVDA) emerge as growth stock favorites.

Intel due to arrive

Looking ahead, Federal Reserve Chairman Jerome Powell's Congressional testimony, coupled with upcoming job data releases, will shape market sentiment. Expectations for interest rate cuts have shifted to later in the year, reflecting the economy's resilience, low unemployment and robust earnings.

While risks persist, the current economic landscape appears favorable. Monetary policy aims to strike a balance between interest rates, inflation and employment levels. Despite uncertainties, maintaining a focus on long-term investment objectives remains paramount.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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