The rally in financial assets that began the year was unable to sustain its momentum in February. Generally strong economic data released during the month and above-consensus inflation figures contributed to a sharp repricing higher in market expectations for the terminal federal funds rate. U.S. Treasury yields rose across all tenors, with the two-year yield up 62 basis points (bps) and the 10-year yield up 41 bps. Corporate earnings also weighed on investor sentiment, as aggregate S&P 500 Index companies’ fourth quarter earnings are poised to decline for the first time since the third quarter of 2020, per FactSet (99% of S&P 500 companies having reported earnings as of March 3). For the month, stocks and bonds broadly fell as the S&P 500 dropped 2.45%, and the Bloomberg US Aggregate Bond Index declined 2.59%.
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