February ended much like January did as the S&P 500 traded higher just before falling on the last couple days of the month. When February was completed, the S&P 500 saw the first monthly decline in 10 months with a loss of 3.89%
Last week’s activity showed that the volatility from earlier in the month has not fully disappeared. After beginning the week with a strong gain of 1.2%, the market began a multi-day decline before finding a short-term bottom on Friday morning.
By Friday’s close, the S&P fell back 2.0% while the Nasdaq Composite lost only 1.1%. The more concentrated Dow Industrial average was hit hardest as it was knocked down 3.1%.
Powell made his debut as Fed Chairman before the House Financial Services Committee on Tuesday. While his prepared remarks didn’t contain anything surprising, his testimony followed by the question and answer session was viewed as more hawkish than participants anticipated. Mr. Powell commented that his economic projections had risen from the December FOMC meeting which led some to wonder if the Fed was considering four potential rate increases this year compared to the 3 anticipated.
As a result, the CME FedWatch Tool placed the chance of a fourth rate hike in December at 29.89%, up from 24.4% last week. Currently, the likelihood of a March rate hike is at 84.55%.
In a similar event, President Trump also made his own unexpected remarks in a meeting on Thursday. In a somewhat hastily planned meeting at the White House, Trump announced that he’d be imposing tariffs on steel and aluminum imports (25% for steel and 10% for aluminum) based upon recommendations by The Commerce Department.
While many were caught flat footed on the announcement, rumors had been circulating for some time that this announcement would be coming and many viewed this as continuation of the fulfillment of election promises.
Nevertheless, many analysts were concerned that this event could led to a trade war with China and others. Meanwhile, the Industrials and Materials sectors fell the hardest last week in the midst of this renewed political attention.