S&P 500 ends its worst month in 2 years

NEW YORK — U.S. stocks sank again on Wednesday and cemented February as the worst month for the market in two years.

Not only was the month's loss sharp, at 3.9 percent for the Standard & Poor's 500 index, it was also the first in a long time. S&P 500 index funds snapped a record-setting run where they had made money for 15 straight months, including dividends.

Some of Wednesday's drop was due to a slide in the price of oil, which sent energy stocks to the market's sharpest losses.

The main fear for the month was the threat of higher inflation and interest rates. Concerns got so high that the S&P 500 spiraled down 10 percent innine days at one point, before trimming some of its losses. The index had five losses of 1 percent or more in February, more than it did in all of last year.

Expect even more swings in coming weeks and months, said Brian Peery, portfolio manager at Hennessy Funds. Investors are trying to figure out how many times the Federal Reserve will raise interest rates this year in the face of a growing economy. Uncertainty is high given that markets are waiting to see how much Washington's recently passed tax cuts will push companies to spend on equipment and wages.

The tumult started just as the month began, when a government report showed a jump in workers' wages that surprised economists. That triggered worries that higher inflation may be on the way and that the Federal Reserve would need to get more aggressive about raising rates as a result. Higher rates make bonds more attractive as investments and can divert buyers away from stocks.

The dizzying result marked a sharp turnaround from the market's blistering start to the year, when stocks jumped amid expectations that corporate profits would keep rising and that the global economy would keep strengthening. It was a continuation of the remarkably smooth rise that investors enjoyed in 2017.

The yield on the 10-year Treasury fell Wednesday to 2.86 percent from 2.90 percent Tuesday.

The benchmark yield relinquished roughly all of its increase from the prior day, when comments from Fed Chairman Jerome Powell once again raised speculation of a more aggressive Fed. He told Congress that he's more optimistic about the economy, which led some investors to anticipate four rate increases for 2018, up from three last year.

Also Wednesday, U.S. economic growth was revised down slightly to a still-solid 2.5 percent annual rate in the final three months of last year, as businesses spent less on investment and restocking shelves than the government had previously estimated. The fourth-quarter advance in the gross domestic product, the economy's total output of goods and services, followed even faster increases in the second and third quarters, the Commerce Department reported.