After kicking off the year with strong gains, stocks continued their upward trend in February. The Canadian equity market ended the month higher, while the S&P 500, the Dow Jones Industrial Average, and Nasdaq 100 all reached new all-time highs. Despite optimism that inflation was free-falling, February’s sticky inflation numbers dashed hopes for a linear decline, prompting investors to reassess the outlook as a Fed rate cut in March may now be off the table.

Canada’s benchmark S&P/TSX Composite Index was 1.6% higher in February, as six of its underlying sectors were positive during the month. The healthcare sector posted an 8.3% gain for the month, while the industrials and consumer staples sectors rose by 5.6% and 5.2%, respectively. Small-cap stocks, as measured by the S&P/TSX SmallCap Index, were up 0.6% for the month.

The U.S. dollar rose by 1.1% versus the loonie during the month, boosting returns of foreign markets from a Canadian investor’s standpoint. Note that all returns in this paragraph are in CAD terms. U.S.-based stocks, as measured by the S&P 500 Index, rose 6.6% in February. All 11 underlying sectors were in the green for the month, with the consumer discretionary and industrials sectors as the leading contributors, gaining 10.1% and 8.5%, respectively. International stocks, as measured by the FTSE Developed ex-US Index, rose 3.2% during the month, while emerging markets rose 5.4%.

The investment grade fixed income indices we follow were down in January. Canadian investment grade bonds, as measured by the FTSE Canada Universe Bond Index, fell 0.3% during the month, while the key global investment grade bond benchmark was down 1.3%. Global high-yield issues were up 0.2%.

Turning to commodities, natural gas prices fell 11.4% during the month, while the price of a barrel of crude oil rose 3.2%. Gold prices rose 0.3%, while copper and silver fell 1.8% and 2.2%, respectively.

Inflation in Canada rose to 2.9% year-over-year in January, led by an acceleration in shelter costs. The Canadian economy added 37,300 jobs in January, as the nation’s unemployment rate improved to 5.7%. The economy expanded at an annualized rate of 1.0% in the fourth quarter, exceeding expectations. January GDP likely gained 0.4% from December, Statistics Canada said in a flash estimate.

U.S. nonfarm payrolls increased by 353,000 in January, as the unemployment rate held steady at 3.7%. The consumer price index rose to 3.2% year-over-year in January. The U.S. personal consumption expenditures price index increased 0.3% month-over-month in January. U.S. retail sales declined by 0.8% month-over-month in January.

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