Stocks close out weak Feb. as Fed concerns remain

STORY: After a roaring start to the year, U.S. stocks closed out Tuesday – and the entire month of February – on a down note, as investors continue to assess whether interest rates will remain high for an extended period of time.

The Dow dropped nearly three-quarters of a point, the S&P shed one third of a point, and the Nasdaq dipped one tenth of a point.

All three of Wall Street’s main indexes notched monthly declines, as economic data and comments from U.S. Federal Reserve officials prompted investors to reconsider the odds the central bank would hike rates higher and longer than the market had forecast in order to tame inflation.

Traders have started to price in the chances of a bigger 50 basis-point rate hike in March, but Loreen Gilbert, CEO of WealthWise Financial, believes it’s still too early to tell.

“We know from the notes from the Fed that there has been a division within the Fed - a few vocal voices wanted to see a 50 basis-point increase last time and they went with 25. I still think it’s going to be 25 again versus 50, because each time the Federal Reserve raises rates they want to see how that actually plays into the economy. And they know that there’s a substantial lag between the time that they raise rates and it actually is assimilated into the economy.”

And while Fed fund futures suggest rates peaking at 5.4% by September, BofA Global Research on Tuesday cautioned the Fed could hike rates to nearly 6%.

Moving on to notable movers… Meta Platforms rose more than 3% after the Facebook parent said it was creating a new top-level product group focused on generative artificial intelligence.

Target gained 1% as investors rewarded the big-box retailer for its surprise rise in holiday-quarter sales - even though it cautioned on 2023 earnings due to an uncertain U.S. economy.

And Norwegian Cruise Line Holdings plunged over 10% after the cruise operator's full-year profit forecast fell short of estimates. It attributes the squeeze to soaring fuel and labor costs.