March 2024 Market Perspective

Haley Hitchman, Partner |

After January’s strong start to the year, February continued to rally for all major U.S. indices.  The S&P 500 rose 5.34%, the Dow Jones Industrial Average up 2.50%.  Technology stocks, pushed by artificial intelligence companies, had the biggest gain with the Nasdaq increasing 6.22%.  

International stocks were not as strong as the U.S., however, were also up for February.  The developed foreign market, as measured by the MSCI EAFE Index, gained 1.83%.  Emerging markets measured by the MSCI Emerging Markets, was up 4.77%. 

Rising interest rates caused difficulty in the fixed-income markets.  The yield on the 10-yeartreasury rose from 3.99% to 4.25%, month-over-month, and the Bloomberg Aggregate Bond Index fell 1.41 percent.

The Bureau of Labor Statistics reported the U.S. added 275,000 non-farm payroll jobs in February, beating economists estimates of 200,000.  Wages increased 0.1% month over month in February, under the 0.2% expected.  Unemployment reported the first increase in 4 months from 3.7% to 3.9% and labor participation was unchanged at 62.5%.

The Personal Consumption Expenditure (PCE) for January was released at the end of February, reporting in line with expectations at 0.4% for the month and 2.8% year-over-year.  PCE measures the goods and services bought by U.S. households and is a key inflation measure the Federal Reserve monitors when determining to cut interest rates.  

The Bureau of Labor Statistics reported the Consumer Price Index (CPI) for February rose 0.4% for the month and 3.2% year-over-year.  The annual rate was slightly above expectations from the 3.1% forecasted.  Core CPI, which removes volatile food and energy prices, was 0.4% for the month and 3.8% year over year. When digging deeper into the inflation report, the shelter index(costs associated with housing) rose 5.7%, causing the higher-than-expected readings for both headline and core inflation. Largely affecting headline inflation, energy prices increased higher than estimates, up 2.3% in February.

While well below the highs of 9%, the inflation reports are still above the Federal Reserve’s (Fed) 2% target.  Federal Reserve Chairman Jerome Powell testified on Capital Hill, “We remain committed to bringing inflation back down to our 2 percent goal and to keeping longer-term inflation expectations well anchored.”  Although the Fed puts more weight on the PCE readings, this latest CPI report is likely to reinforce the case for the Fed to continue to wait until summeror longer to begin cutting interest rates.  According to CME Fed Watch, as of when this articlewas written, there is an 83% chance the Fed will hold rates at their meeting in May and a 57% chance they will cut rates in June.  According to Paul Ashworth, chief North American economist for Capital Economics, the recent CPI report “leaves Fed officials some way from attaining the ‘greater confidence’ needed to begin cutting interest rates.” Despite the concerns on inflation, investors weren’t bothered by the recent report as all major indices opened higher upon its release. 

All indices are unmanaged, and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results.