Monthly Market Monitor: February 2014 Recap

The S&P 500 Index finished February at a new all-time high, gaining nearly 4.6% including dividends, for its best monthly performance since October. The S&P 500 record close at 1,859 was its 48th all-time high set over the past 12 months. Equity sentiment brightened as rising consumer confidence reflected the belief that severe winter weather was the primary cause behind recent slowing in hiring, housing and retail sales. Wall Street was also reassured by Federal Reserve Chair Janet Yellen's pledge to refrain from reducing monthly asset purchases if the economy were to unduly weaken. Stocks, however, met some resistance at month-end as the escalating conflict in Ukraine drew jitters. President Obama said the U.S. is closely monitoring the situation and was "deeply concerned" by Russian military movements into Ukraine's Crimea region. All in all, on a backdrop of further improvements in corporate earnings, the U.S. equity markets are about to enter a sixth year of a bull market that began on March 9, 2009.

Smaller-capitalized stocks outpaced large-caps as the Russell 2000, a proxy for small-cap equities, rose by 4.7% in February. Mid-cap stocks, as measured by the Russell Mid Cap Index, performed even better, gaining 5.9% during the month. Growth stocks outperformed value as the Russell 1000 Growth Index advanced 5.2%, while the Russell 1000 Value Index gained 4.3%. Commodities, as measured by the S&P GSCI Index, also rebounded, gaining 4.5% in February. Gold continued to recoup losses from last year's rout, rising 6.6% last month and extending its year-to-date (YTD) recovery to 10%. Crude oil futures rose 6.1% in February, daily closing above the $100/barrel mark during the second half of the month.

Nine of the ten major sector groups ended with February gains, led by Materials (+6.9%), Consumer Discretionary (+6.2%), and Healthcare (+6.2%). Financials (+3.1%) gained the least last month, while Telecom (-1%) lost value. Two months into the year, Healthcare (+7.2%), Utilities (+6.5%) and Materials (+2%) are the top performing sectors of 2014.

Overseas developed markets outperformed the U.S. as the MSCI EAFE Index gained nearly 5.6%. European markets got a boost after the European Commission raised its growth outlook on the region's 18-nation euro-zone to 1.2% in 2014 from 1.1%. Emerging markets, as measured by the MSCI Emerging Markets Index, also had its best monthly gain since October, returning over 3.3%.

Turning to bonds, U.S. Treasuries, as measured by the Barclays U.S. Government Bond Index, returned 0.3% in February, extending gains so far in 2014 to 1.6%. The yield on benchmark 10-year U.S. Treasury notes rose just one basis point during the month to 2.65%. U.S. investment grade bonds, as measured by the Barclays U.S. Aggregate Bond Index, fared incrementally better, returning 0.5% last month. The Barclays U.S. Corporate High Yield Index, a proxy for non-investment grade corporate bonds, jumped by 2% in February, extending 2014 gains to over 2.7%. Municipal bonds, as measured by the Barclays Municipals Index, returned 1.2% during the month, extending its YTD to 3.1%.

This information compiled by Cetera Financial Group is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The information has been selected to objectively convey the key drivers and catalysts standing behind current market direction and sentiment.

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