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Morning stock market summary

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Futures were looking to start the new month off on a positive note, but that tone has shifted and the current setup is for a modest decline at the open.  Following yesterday’s stronger-than-expected inflation data in France and Spain, this morning it was Germany’s turn to report hot inflation data, and that predictably, has been followed by hawkish commentary from ECB officials.  In China, stronger-than-expected Manufacturing PMI data led to a 4% rally in Hong Kong’s Hang Seng, but stronger growth in China will be greeted as inflationary by the market, hence the move higher in US treasury yields. Economic data on the calendar today includes Manufacturing PMI reports from S&P and ISM as well as Construction Spending.  Minneapolis Fed President Kashkari will also be speaking this morning, so you can expect the headlines from that even to be hawkish.

2023 is already 16% complete, so we can start to get a read on how trends are shaping up.  Below we summarize the performance of S&P 500 sectors through the end of February.  On a YTD basis, there’s been quite a bit of disparity in sector performance as four sectors are up over five percent, and two are down over 5%.  Between the extremes, more than 20 percentage points separate the best-performing sector (Consumer Discretionary) which is up 12.7%  from the worst-performing sector (Utilities) which is down close to 8%.  Looking at where sectors finished out February relative to their trading ranges, not a single sector is overbought relative to its 50-day moving average, nearly half are below their 50-day moving averages, and four sectors are oversold.  That’s not what you would expect to see in a year where the S&P 500 is up nearly 4% YTD.

While there’s a wide dispersion in sector performance after the first two months of this year, it’s a big improvement versus where the market stood at this time last year.  Twelve months ago, more than 40 percentage points divided the best-performing (Energy) and the worst-performing sectors (Consumer Discretionary), six sectors were oversold, and the only sector above its 50-DMA was Energy. February wasn’t a great month for stocks, but it sure beats where things stood last year at this point.

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