Dow Jones struggles, S&P 500 and Nasdaq Composite near flat on the final day of February

12:06pm: Indexes on pace to decline in February

At midday, the Dow was down 175 points, 0.5%, to 32,714, the Nasdaq Composite added 17 points, 0.2%, to 11,484 and the S&P 500 dipped 4 points, 0.1%, to 3,978.

The benchmarks are all headed for a losing month as things stand. The Dow is down 4% for the month, the S&P 500 is off 2.5% and the Nasdaq Composite is 1% lower.

Joshua Mahony, senior market analyst at online trading platform IG, pointed to consumer confidence.

“The latest consumer confidence survey highlighted a growing unease amongst the US population, with both the present situation and expectations declining in February,” Mahony wrote Tuesday. “Recent optimism over a ‘soft landing’ in the US economy has been built on the apparent strength of the US consumer spending. However, the survey showed a decline in the number of those planning to spend on big ticket items such as homes, autos, or holidays. The report provided a heads up for next weeks jobs report, with a surge in those finding employment plentiful bringing expectations of further payrolls strength. ” 

9:40am: Rising bond yields pose threat to stocks

US stocks edged lower at the open on Tuesday as investors struggled for direction on the last day of February trading.

Just after the market opened, the Dow Jones Industrial Average had dipped 118 points or 0.4% at 32,771 points, the S&P 500 was down 9 points or 0.2% at 3,973 points, and the Nasdaq Composite was down 21 points or 0.2% at 11,445 points. market analyst Fawad Razaqzada said investors were understandably cautious to invest money into the markets, given the cost-of-living crisis around the world and the stickiness of inflation.

“While we have seen signs of peak inflation and the economy has held its own better than hoped, rising bond yields continue to pose a big threat to stocks and other risk assets,” Razaqzada said.

He noted with yields on the rise, this has weighed on the S&P 500’s so-called equity risk premium (ERP) which measures the potential reward investors might reap from buying US stocks, above and beyond a “risk-free” asset, namely US bonds.

“Given the elevated macro risks and a low ERP many investors would rather avoid all the headache and buy short-dated Treasurys to earn a fixed, higher, return of around 5% or so,” he said.

“Yet, the US equity markets have remained relatively resilient. Undoubtedly, there are other factors at play. A low ERP does not mean all stocks are bad. It just means investors will have to be very selective in picking the right stock and remaining nimble.”

6.30am: Stocks on track for another losing month

US stocks are expected to edge higher at the start of the final trading session of February, however, despite a solid start to the year, the major indexes are on pace for their second negative month in three.

In pre-market trading, futures for the blue-chip Dow Jones Industrial Average (DJIA), the broader S&P 500, and the tech-laden Nasdaq 100 were all up 0.1%.

On Monday, the DJIA closed 72 points, or 0.2% higher at 32,889, while the S&P 500 and Nasdaq Composite gained 0.3% and 0.6%, respectively.

As of Monday’s close, the DJIA is down 3.5% for the month and the only major index negative for the year. Both the S&P 500 and Nasdaq Composite are positive in 2023, but down 2.3% and 1%, respectively, in February.

James Hughes, Global Head of Brand at Scope markets commented: “US futures made a solid start to the overnight session but momentum has been ebbing away since … A mixed session in Asia and a weaker start in Europe is doing little to lend support here, whilst month-end position-keeping also has the ability to provide a degree of influence.”

He added: “US economic data remains something of a mixed bag with yesterday’s better-than-expected pending home sales print again adding weight to policy hawks at the Federal Reserve. Later in today’s session, the Chicago PMI print and Consumer Board Confidence figure will both be in focus, with upbeat prints here unlikely to offer any respite for equities, either.”

Also on the economic front on Tuesday, investors will eye wholesale inventories and the S&P Case-Shiller home prices index.  

On the corporate front, in after-hours moves following news, Zoom Video rose after posting strong earnings, while Occidental Petroleum fell after posting a top-and-bottom line miss.

More retail earnings reports are due for release on Tuesday, including results from Target, AutoZone, Rivian Automotive, Norwegian Cruise Line Holdings and AMC Entertainment.