Love for stocks cooled as 10-month streak ends

3.9% monthly fall was worst since Jan. 2016

Stock investors’ hearts skipped a beat in February.

It wasn’t Cupid messing with their emotions, but a sudden and sizable dive in stock prices that caused the U.S. market to finish the month with a loss, snapping a streak of 10 straight monthly gains.

The Standard & Poor’s 500 index, a broad gauge of stocks, ended February down 3.9%, its first monthly loss since March 2017, which left it just shy of an 11-month streak set in 1958, according to S&P Dow Jones Indices. The fall also was its biggest monthly decline since January 2016, when investors stepped back from stocks because of concerns that China’s economy was in danger of a major contraction.

This February was a turbulent period, which saw the return of wild price swings for stocks after a long period of calm. The volatility — including two days in which the Dow Jones industrial average suffered record point drops of more than 1,000 points — was set in motion by fears that borrowing costs would spike more than expected this year, threatening to slow growth for the economy and stocks.

The stock market decline at the start of the month was swift and startling, a 10.16% fall in the S&P 500 over a nine-session span ending Feb. 8, resulting in the first correction — a drop of 10% or more — in two years.

To be sure, the market has recouped a big chunk of its losses and has climbed back into positive territory for the year. A 401(k) investor that started the year with $100,000 invested in the S&P 500 would have seen his or her account balance swell to $107,453 by late January’s peak, only to sink to $96,536 at the low for the year. At the end of February, that initial investment was still showing a gain of about $1,500.

The shift in the market’s tone is viewed as a sign of change.

So what changed?

Overall, the stock market has been on a steady rise for more than a year with few hiccups along the way. Big market drops were absent, as was investor fear. But volatility came roaring back as rate-hike worries intensified.

The S&P 500’s longest-ever period without a 3% drop, dating to November 2016, was snapped Feb. 3, according to Bespoke Investment Group. The large-company stock index also suffered its first 5% drop since late June 2016 when stocks tanked after the surprise vote by Britain to exit the European Union. The S&P 500’s first correction in two years followed Feb. 8.

Similarly, the VIX, a closely watched fear gauge, shot up more than 100% in a single day in February.

“We saw a tsunami of volatility,” said Paul Schatz, president of Heritage Capital, a Woodbridge, Conn., investment firm.

SPENCER PLATT/GETTY IMAGES A trader works at the New York Stock Exchange on Monday.