‘Sort of churning’ as Wall St. ends month

A frigid February for Wall Street closed out with more losses on Tuesday.

The Standard & Poor’s 500 fell 0.3% to lock in a loss of 2.6% for the month. The Dow Jones industrial average fell 232 points, or 0.7%, and the Nasdaq composite slipped 0.1%. Both also sank for the month.

After a strong start to the year bolstered by hopes that inflation was on the way down, Wall Street shifted into reverse last month.

“Everything is sort of churning,” said Thomas Martin, senior portfolio manager at Globalt Investments. “Right now, the economy is doing fairly well, but earnings estimates for 2023 for the S&P 500 are continuing to drift lower. So you’re still moving in a softening direction.”

He has raised his forecast for how high the Federal Reserve will ultimately raise rates, but he also said it’s difficult to feel a great amount of certainty given all the push and pull.

Many investors now see the Fed raising its key overnight interest rate to at least 5.25%, if not higher, and keeping it there through the end of the year. The Fed’s rate is currently set in a range of 4.50% to 4.75% after starting last year at virtually zero.

The heightened expectations for rates have sent yields jumping in the bond market this month. The yield on the 10-year Treasury held steady at 3.92% on Tuesday.

The two-year yield, which moves more on expectations for Fed action, ticked up to 4.81% from 4.78%. It’s near its highest level since 2007.

Reports released Tuesday showed some slight cracks in the economy. One said that confidence among U.S. consumers unexpectedly fell in February. Another said that manufacturing in the Chicago region weakened more than expected.

All the worries have come across a backdrop of falling earnings for big corporations. S&P 500 companies are in the midst of reporting their first decline in profits from year-earlier levels since 2020, according to FactSet.

Most companies have already reported their results for the last three months of 2022, but several big-name retailers are still on the schedule for this week.

Among them was Target, which on Tuesday reported better profit and revenue than expected for the latest quarter. But it also echoed some other retailers in giving a cautious forecast for upcoming results as U.S. households contend with still-high inflation. Its stock rose 1%.

On the losing end was Norwegian Cruise Line. It tumbled 10.2% after reporting a bigger loss for the latest quarter than expected. It also gave profit forecasts for the upcoming quarter and year that fell short of Wall Street expectations.

All told, the S&P 500 fell 12.09 points to 3,970.15. The Dow fell 232.39 points to 32,656.70, and the Nasdaq dropped 11.44 points to 11,455.54.