E conomic data in February continued to show signs of an improving economy. The manufacturing and non-manufacturing sectors strengthened further as the job market showed some improvement as well. One of the main disappointments during 2010 was the lack of improvement in the job market. While still very early, there appears to be some nascent recovery in this critical area of the economy. With consumption accounting for about 70% of U.S. economic activity, gains in employment should help support the economic recovery.

Price levels have moved somewhat higher recently, primarily due to rising energy and commodity prices. The latest producer and consumer price indices from January reflected these increases on a month-over-month basis. However, consumer price readings on a year-over-year basis are still rather muted. Overall, these increases have not caused too much concern up to this point for the U.S. In contrast, increasing energy and food prices have been more problematic in some emerging markets, like China, with those countries taking action to try to control them.

Political unrest in the Middle East continued to spread as Egyptian President Mubarak resigned and protests erupted against Libyan leader Qaddafi. One major consequence of this unrest has been an increase in oil prices. While oil prices had risen in the last few months of 2010 with increased confidence in the global economic recovery, as problems escalated in Libya, oil prices spiked in February to levels not seen since 2008.

For the most part, U.S. equity markets have been resilient in the face of escalating conflict in the Middle East. Investors seemed to be more focused on the improvements in the U.S. economy, and this helped support the continuation of equity market progress in February that began in the second half of 2010. However, the negative impact increasing oil prices can potentially have on the global economic recovery became a concern for the market as February concluded. Nevertheless, U.S. equity markets continued to advance in February and the S&P 500 Index gained about 3.4% on a total return basis. After a slight decline in January, the Russell 2000 Index of small capitalization companies roared back last month, increasing 5.5% in February.

After lagging significantly in 2010 with the burden of sovereign debt problems, European markets built on their recent strength and turned in another solid month. The broad developed markets moved higher with the MSCI EAFE Index gaining 3.3% for February on a gross return, dollar basis. In contrast, emerging markets, which had seen strong outperformance for much of the last two years, declined again in February. The MSCI Emerging Markets Index was off about 0.9% for the month and has declined 3.6% year-to-date on a gross return, dollar basis. Concerns about rising inflation and higher interest rates have put negative pressure on emerging markets.

As they had in January, preferred stocks and high-yield bonds outperformed other areas of fixed income during February. The Barclays Capital U.S. Aggregate Bond Index rose slightly in February, up about 0.3%. The long U.S. Treasury index bounced back in February after declining in January as the situation in the Middle East deteriorated. However, the broad U.S. Treasury index is still slightly negative year-to-date.

Moving into March, two factors seem to be heavily influencing the market. First, economic data continues to provide evidence that the broad economic recovery is still intact, if not gaining momentum. This environment has been supportive of equity market progress. However, investors are now contending with spreading political unrest in the Middle East and the subsequent rise in oil prices, which has added a significant uncertainty and risk to the market landscape. After a rather steady run in equities over the last six months in which no meaningful correction has occurred, market participants might need to be prepared for a more volatile environment as events in the Middle East continue to unfold.

Market date courtesy of Bloomberg. The indices mentioned are unmanaged and not available for direct investment. Past performance is no guarantee of future results.

The Market Commentary provided represents the opinion of National Planning Holdings and should not be considered a recommendation to buy or sell securities. All information presented is believed to be reliable, however, we can make no representation that the information contained herein is accurate or complete in as much as information we relied on comes from third-party data providers who make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide. You agree not to rely on the information contained herein and to hold us harmless for inaccuracies of any kind relating to such data. The trademarks and service marks contained herein are the property of their respective owners. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of National Planning Holdings.

Economic data in February continued to show signs of an improving economy. The manufacturing and non-manufacturing sectors strengthened further as the job market showed some improvement as well. One of the main disappointments during 2010 was the lack of improvement in the job market. While still very early, there appears to be some nascent recovery in this critical area of the economy. With consumption accounting for about 70% of U.S. economic activity, gains in employment should help support the economic recovery.

Price levels have moved somewhat higher recently, primarily due to rising energy and commodity prices. The latest producer and consumer price indices from January reflected these increases on a month-over-month basis. However, consumer price readings on a year-over-year basis are still rather muted. Overall, these increases have not caused too much concern up to this point for the U.S. In contrast, increasing energy and food prices have been more problematic in some emerging markets, like China, with those countries taking action to try to control them.

Political unrest in the Middle East continued to spread as Egyptian President Mubarak resigned and protests erupted against Libyan leader Qaddafi. One major consequence of this unrest has been an increase in oil prices. While oil prices had risen in the last few months of 2010 with increased confidence in the global economic recovery, as problems escalated in Libya, oil prices spiked in February to levels not seen since 2008.

For the most part, U.S. equity markets have been resilient in the face of escalating conflict in the Middle East. Investors seemed to be more focused on the improvements in the U.S. economy, and this helped support the continuation of equity market progress in February that began in the second half of 2010. However, the negative impact increasing oil prices can potentially have on the global economic recovery became a concern for the market as February concluded. Nevertheless, U.S. equity markets continued to advance in February and the S&P 500 Index gained about 3.4% on a total return basis. After a slight decline in January, the Russell 2000 Index of small capitalization companies roared back last month, increasing 5.5% in February.

After lagging significantly in 2010 with the burden of sovereign debt problems, European markets built on their recent strength and turned in another solid month. The broad developed markets moved higher with the MSCI EAFE Index gaining 3.3% for February on a gross return, dollar basis. In contrast, emerging markets, which had seen strong outperformance for much of the last two years, declined again in February. The MSCI Emerging Markets Index was off about 0.9% for the month and has declined 3.6% year-to-date on a gross return, dollar basis. Concerns about rising inflation and higher interest rates have put negative pressure on emerging markets.

As they had in January, preferred stocks and high-yield bonds outperformed other areas of fixed income during February. The Barclays Capital U.S. Aggregate Bond Index rose slightly in February, up about 0.3%. The long U.S. Treasury index bounced back in February after declining in January as the situation in the Middle East deteriorated. However, the broad U.S. Treasury index is still slightly negative year-to-date.

Moving into March, two factors seem to be heavily influencing the market. First, economic data continues to provide evidence that the broad economic recovery is still intact, if not gaining momentum. This environment has been supportive of equity market progress. However, investors are now contending with spreading political unrest in the Middle East and the subsequent rise in oil prices, which has added a significant uncertainty and risk to the market landscape. After a rather steady run in equities over the last six months in which no meaningful correction has occurred, market participants might need to be prepared for a more volatile environment as events in the Middle East continue to unfold.

Market date courtesy of Bloomberg. The indices mentioned are unmanaged and not available for direct investment. Past performance is no guarantee of future results.

The Market Commentary provided represents the opinion of National Planning Holdings and should not be considered a recommendation to buy or sell securities. All information presented is believed to be reliable, however, we can make no representation that the information contained herein is accurate or complete in as much as information we relied on comes from third-party data providers who make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide. You agree not to rely on the information contained herein and to hold us harmless for inaccuracies of any kind relating to such data. The trademarks and service marks contained herein are the property of their respective owners. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of National Planning Holdings.