This may come as a shock, but as a stock, Apple (NASDAQ 🙂 was not an exceptional performer in February.
Maybe it will be great again. It's Apple, after all. And it still has a market cap of $ 2.03 trillion.
However, stocks fell 8.1% in the month, the worst of the 30 stocks in the 12th worst of the. AAPL stocks were also among the 25 worst stocks in the US.
Former market enthusiast Apple wasn't the only previously loved stock with a weak month. Investors Sold Tesla (NASDAQ :), which was down nearly 15% in February; and Clorox (NYSE :), -13.6% for the month. They even pushed down Moderna (NASDAQ :), whose vaccine has been a major weapon against the COVID-19 virus. Shares of the biotech company fell 10.6% last month.
Oh, and then there's GameStop (NYSE :).
Shares of the video game and consumer electronics retailer fell 68.7% this month after rising from 151% just last week and 1,625% in January.
A definite shift in investor sentiment is emerging: a number of previously downtrodden stocks have now been embraced by investors, including Marathon Oil (NYSE :), Twitter (NYSE :), cruise ship operator Carnival (NYSE :), copper and gold miner Freeport-McMoRan (NYSE :), Alaska Air Group (NYSE :), Southwest Airlines (NYSE :), Delta Air Lines (NYSE 🙂 and United Airlines Holdings (NASDAQ :). They were all up 30% or more in the month.
Modest Profits as Outlook Shift
The downside: Stocks were generally modestly higher in February after falling largely in January. The Dow rose 3.2%, the SPX 2.6%, and the stumble to 0.9%.
Overall market performance reflects not so much weakness, but rather an equity-driven narrative indicating that an economic recovery is taking shape or imminent and that money is moving towards better opportunities.
Vaccines that can protect against COVID-19 are becoming available every day in the United States and elsewhere. The Johnson & Johnson (NYSE 🙂 COVID-19 inoculation was approved for use in the US on Saturday.
The Biden government, which has been in office for barely a month, is working to pass a $ 1.9 trillion stimulus package.
Interest rates are starting to rise as a result of the demand for more credit.
The markets got bumpy at the end of the month. Shares sold out for several days as bullishness clashed with signs that bond traders could choose to make the recovery more expensive. The Treasury was trading at around 0.65% in early September. It's now up 1.5%, up about 59% since December 31, and its highest level in about a year.
The major averages were all lower in the last week of February, with the Dow's 1.78% drop, the first after three weeks of gains.
Yields fell slightly on Friday, but investors and the Federal Reserve will keep a close eye on the bond market. (Remember, 10-year yields are at historically low levels even now).
One could see the recovery mentality at work, especially in two sectors, during the month.
Financial stocks. Stocks in this group went up with interest rates and with the prospect of new financing deals. Banks like Goldman Sachs (NYSE 🙂 and JPMorgan (NYSE 🙂 finished as the second and fifth best Dow performer (17.8% and 14.4% respectively) as higher interest rates contribute to earnings.
There are also hints of deals in the financial industry. Smaller regional banks are ready to be bought out. People & # 39; s United Financial (NASDAQ :), which operates in southeastern New York and New England, has signed a $ 7.6 billion deal with M&T Bank (NYSE :), the Buffalo banking company with operations in the entire Mid-Atlantic part of the country.
Energy Equities. Prices were up 14% this month, surpassing $ 60 a barrel for the first time in a year. That caused a huge surge in energy stocks. Part of the price increase was due to expectations of increased demand, but it also reflected an agreement between Saudi Arabia, Russia and the Organization of Petroleum Exporting Countries that low prices (less than $ 20 in worst market panic) from last March) are not good. for the cartel and its allies.
The (OSX) jumped 19.4% in February and is up 25% this year. The (XOI) rose 21.1%. Exxon Mobil (NYSE 🙂 was up 21% in the month and 31% in 2021.
Chevron (NYSE :), the last Big Oil stock in the Dow, jumped 18.1%, the third best among Dow stocks.
Marathon Oil jumped 53.3% and led the S&P 500.
The theme of recovery mainly extended to other goods. The metal rose 15.4% in New York over the month to $ 4.0925 a pound, the highest level since 2010. Freeport-McMoRan Copper & Gold shares are up 26% this month. Copper is an important material in many industrial products and is therefore widely watched as an indicator of global economic conditions. Higher copper prices say the recovery is imminent.
Alcoa (NYSE :), which produces crude, jumped 36.6% in February as investors expect more demand for the metal. Arconic (NYSE :), which processes crude aluminum into specialty products, saw its shares fall by 13.1% as a result of rising material prices.
As the material stock increases, machine manufacturers follow suit. Caterpillar (NYSE 🙂 was the best-performing Dow stock, up 18.1% on the assumption that there will be infrastructure projects and lots of road and building construction to boost jobs.
Recovery Bulls Boost Beaten-Down Performers
The Recovery Bulls are also penetrating seriously downtrodden stocks, such as travel-related companies and airlines, whose businesses were crushed by the pandemic.
Wynn Resorts (NASDAQ :), MGM Resorts International (NYSE 🙂 and Las Vegas Sands (NYSE :), three of the largest gambling companies, were all up more than 30%. Carnival and rival Royal Caribbean (NYSE 🙂 were each up 43%.
Stocks of airlines soared as investors saw more seats occupied during the year. Alaska Air Group, Southwest Airlines, United Airlines and Delta Air Lines were among the top 30 S&P 500 performers this month.
In addition, Boeing's (NYSE 🙂 737 MAX has been recertified and is taking to the air. Shares of the airline giant rose 9.2% in February.
Admittedly, airline stocks had been crushed in 2020 as passengers refused to fly anywhere. Alaska Air shares were down 22% in 2020 – after falling nearly 58% in the first quarter alone.
Finally, the car rental company Avis Budget Group (NASDAQ 🙂 rose 34.4% in February, the highest of the shares in the (DJT). Obviously, travelers need transportation from airports.
Potential Market Catalysts
When economic conditions suggest that a recovery is underway, several factors can influence market development. forward:
Fears of inflation could become more than just chatter among market experts. That will depend on the Fed and Chairman Jerome Powell, who have said repeatedly – as recently as last week – that getting the economy going is his top priority. It's too early to say whether Powell will be able to achieve his goals, but job growth, a higher minimum wage and a government stimulus package are ideas he has explicitly endorsed.
The recovery is not as robust as hoped. Huge industries were hit by the pandemic, particularly travel and leisure, restaurants and retail. Their recovery will take time. The scheduled Friday will be important. A report from the Conference Board last week suggested a lot of caution. Ultimately, the recovery will depend on Congress and the Biden administration. Many Democrats feel that they were not aggressive enough to get the economy out of the 2008-2009 financial crisis.
There is also an afterthought: a shortage of computer chips used in everything from personal computers to cars and microwaves. If a product needs a chip to work, and supply is limited, it can hinder production.
Shares are overvalued. US equities became severely overvalued in late 2019 and early 2020 and needed a catalyst to trigger a downturn. That turned out to be the pandemic. The NASDAQ also moved into overvalued territory in late 2020 and early January. Finally, there was a relapse.
Free stock quotes from companies like GameStop, AMC Entertainment (NYSE :), and stereo headset company Koss (NASDAQ :), fueled by Reddit and other social media platforms, could potentially spiral out of control and destabilize the financial system. Probably not, but it's a good look. Koss, for example, traded between about $ 1 and $ 2 for most of 2020. Then suddenly a bid for the stock was up to $ 126.00. It is now $ 16.71.
A note about the market from Friday. The difference between the 52-week highs and lows for most stocks is about to narrow. That's because the markets bottomed out on March 23, 2020. Friday was Apple's 52-week high of $ 145.09, hit January 25, up 172% from the 52-week low of $ 53.14. reached on March 23, 2020. If the gap narrows without widening its 52-week high, investors could be disappointed.
(For the record, GameStop & # 39; s 52-week high of $ 481.99 is up 18,654% from its 52-week low, reached April 3, 2020.)
The bottom line with regard to the market closing on Friday is that the conditions under which stocks rise are basically in place. However, there are certainly risks: from the economy, from the internal market and from the political environment.
