Monthly Market Monitor: February 2012

Global market performance gained momentum in February with the S&P 500, a broad measure of U.S. equity performance, posting its third straight monthly advance, its longest string of gains in a year. The benchmark index returned 4.3% last month (including dividends) ending just off a four-year high and is up 9.0% so far this year. During the closing week of the month, the Dow Jones Industrial Average closed above 13,000 for the first time since May 2008 and the NASDAQ Composite reached 3,000 for the first time since mid-December 2000. Continuing January’s low market volatility, February helped make the first two months of 2012 the first time since 1995 that the S&P 500 ended without a single down day of 1% or more. The milestones came courtesy of improving U.S. economic data that encouraged increased risk-taking within the equity markets. Overall, investors were rewarded with Wall Street’s best February in 14 years.

Not to overlook prevailing market uncertainties, Europe’s debt crisis continued as the primary sentiment overhang, but concerns eased after EU leaders agreed to extend Greece a second, even larger €130B (US$175B) bailout package. Although the latest quarterly corporate earnings reports continue to predominately top forecasts, Standard & Poor’s noted that the ongoing eight-quarter run of double-digit earnings growth may end with fourth quarter growth so far tracking at 8.3%. Home prices are still trending downward and in semiannual testimony before Congress, Federal Reserve Chairman Ben Bernanke cited elevated unemployment as a key reason to keep interest rates “exceptionally low.”

In U.S. sector performance, nine of the ten S&P 500 major market groups delivered positive February returns with Technology (+7.4%), Energy (+5.9%) and Financials (+5.0%) as the top performers. For the year, Technology (+15.6%), Financials (+13.5%) and Consumer Discretionary (+10.9%) are the best returning sectors, while Utilities (-2.9%) is the only year-to-date negative performing sector.

Non-U.S. developed equity markets again outpaced domestic markets, serving up 5.8% in positive performance last month, as measured by the MSCI EAFE Index. Emerging markets also excelled as the MSCI Emerging Markets Index, a proxy for this asset class, returned 6.0% in February.

As measured by the Barclays US Government Bond Index, U.S. government debt lost ground, falling 0.7% in February, which is its first monthly decline since last October. Investment grade bonds (excluding municipals), as measured by the Barclays US Aggregate Bond Index, fell 0.02% last month. Municipal bonds, as measured by the Barclays Municipals Index, returned 0.1% in February. Non-investment grade corporate bonds returned 2.4% last month, according to the Barclays US Corporate High-Yield Index.

This information is compiled by Cetera Financial Group. No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

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