For all the talk of a crisis at the start of the month, February ended up being the best period for global markets since July.
Stocks, bonds and commodities rose together in February for the first time in seven months, reversing January's losses in equities and raw materials. The S&P 500 Index has closed at a record for two straight days, erasing losses from January spurred by concern economic turmoil would spread from emerging markets as the Federal Reserve began reducing stimulus efforts.
Commodities climbed the most since July as a drought in Brazil triggered rallies in coffee and sugar. Leaders of the world's major economies pledged to maintain accommodative policies even as S&P 500 companies the biggest gain in quarterly earnings since 2011.
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“Corporate America is having a little more confidence in the trajectory of the economy,” Darrell Cronk, the New York-based regional chief investment officer at Wells Fargo Private Bank, which oversees $170 billion, said. “We still like equities relative to other asset classes.”
The benchmark gauge for American equities advanced 4.3% in February to 1,859.45, reversing its 3.6% loss from the previous month. Stocks around the world slid between Jan. 15 and Feb. 4 after Argentina unexpectedly devalued the peso, Turkey doubled interest rates and manufacturing growth slowed in China,
U.S. consumer confidence improved last month and orders for durable goods fell less than forecast in January, a sign manufacturing was beginning to emerge from the harsh winter. Other reports showed that the economy grew at a slower pace in the fourth quarter than previously estimated.
“Equities appear to be on a mission to trend higher and forge through concerns of negative economic readings,” Terry Sandven, chief equity strategist at Minneapolis-based U.S. Bank Wealth Management, which oversees $115 billion, said. “Like in 2013, the markets are proving to be remarkably resilient and look to continue in 2014.”
Stocks gained last week as investors speculated the Fed may change its strategy should the economy weaken and data showed improving consumer confidence. Retailers led the advance with a 4.5% rise, the biggest gain since 2012.
Target Corp. added 11% for the week as profit topped estimates and the company said it's recovering from a data breach during the holiday season. Humana Inc. jumped 9.4% after proposed government cuts to the Medicare Advantage program were less than previously expected. EBay Inc. climbed 7.7% as Carl Icahn escalated his push to convince the online auction site to spin off PayPal.
The S&P 500 advanced 1.3% over the five days, closing at an all-time high. The gauge is up 0.6% this year after a 30% surge in 2013. The Dow Jones Industrial Average increased 218.41 points, or 1.4%, to 16,321.71, in the week.
Benchmark stock indexes in all 24 developed nations advanced in February, with gauges in Denmark, Greece, Ireland and Portugal rallying at least 10% to lead gains. Chile's equity gauge jumped 8.1% and shares in Dubai rallied 12% as the MSCI Emerging Markets Index climbed 3.2% for its best advance since October after slumping 9.5% in the previous three months.
The MSCI All-Country World Index of stocks climbed 4.9% including dividends in February in its strongest advance since September. The Standard & Poor's GSCI Total Return Index of metals, fuels and farm products gained 4.5% for the month. The Bank of America Merrill Lynch Global Broad Market Index returned 0.6%, including reinvested interest. The Bloomberg Dollar Spot Index fell 1.4%, the most in five months, as the U.S. currency weakened against all 16 major peers.
Improving profits fueled gains in stocks. Adjusted earnings per share beat analysts' average estimates at 74% of the 488 companies in the S&P 500 that reported results for the latest quarter, according to data compiled by Bloomberg. Profits grew 8.3% for the group as sales increased 0.7%.
“For investors looking for fundamentals, February was a vindication,” John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York, said. “The basic fundamentals that made the market go up last year are still in place. They may not be as sharply drawn, but they are still there.”
Gold, which plunged 28% in 2013 for its worst yearly decline since 1981, capped its first back-to-back monthly advances since August as political turmoil in Ukraine fueled demand for a haven asset. The precious metal added 6.6% in February, the best monthly gain since July, and reached a 16-week high of $1,345.52 an ounce on Feb. 26.
“Gold has probably been one of those commodities that surprised people on the upside,” Jason Lejonvarn, a strategist in London at Hermes Fund Managers Ltd., which oversees $1.6 billion in commodities, said.
Natural gas futures soared to a five-year high in February as waves of arctic cold depleted U.S. stockpiles of the heating fuel to the lowest seasonal levels in 10 years. Prices jumped and sank with shifting weather forecasts and ended the month lower, making it the most volatile month for gas in more than four years.
“The buzz word for the year was 'polar vortex;' I had never heard that word in my life and that added to the hysteria of the market,” said John Woods, president of JJ Woods Associates and a Nymex floor trader. “You had a big push where everyone wanted to jump in on it.”
Gas for next-month delivery surged as much as 42% to $6.493 per million British thermal units on Feb. 24, the highest intraday price since 2008, from a low of $4.563 on Feb. 10. Prices ended February 6.8% lower for the month at $4.609 per million BTU.
“We've had a very significant deterioration in economic data over the past month or so,” Jake Lowery, a money manager at ING U.S. Investment Management, which oversees about $200 billion, said. “It would be a mistake to completely ignore that data on the basis of this cold weather effect. That decline in economic impulse should be natural positive for the U.S. Treasury market.”