Stocks continued their gains in February with the Dow Jones Industrial Average closing above the psychologically important level of 13,000 on February 28^th – the first time since May 20, 2008. The Dow slipped below the milestone on Leap Day, but still increased 2.53% for the month to close at 12,952.10. Broader averages followed suit, with the tech-heavy Nasdaq hitting 3,000 for the first time since December 2000 and increasing 5.44% during the month. The S&P 500 also advanced 4.06%.

Since October 2011, investor confidence has risen alongside strengthening corporate profits and improvements in leading economic indicators — including jobless claims and the Institute for Supply Management (ISM) index. According to the Conference Board its consumer confidence index rose to 70.8 in February, well above the January reading of 61.5.

Contrary to positive sentiment, orders for durable goods in January declined by almost 4% to $206 billion, according to the Commerce Department — the biggest drop since January 2009. In addition, the Standard & Poor’s Case-Shiller Home Price Index cast new doubt on the housing market. The national composite for housing prices declined 3.8% during the fourth quarter of 2011 and 4.0% versus the fourth quarter of 2010.

On the European front, the 130 billion euro ($174 billion) second bailout package for Greece was finally approved. While the outcome for Greece and whether or not it will eventually default remains uncertain, the package is perceived to have more benefit than risk and will require the country to cut 3.2 billion euro from its budget. Today, the European Central Bank launched its second three-year long-term-refinancing operation to further ease balance sheet pressure. Banks are expected to take another 530 billion euros ($713 billion) in addition to the 500 billion euros borrowed in December.

With the Dow hitting 13,000 and the likes of Apple trading at a record high, investors want to know if stocks can move higher. While no one knows, historical comparisons are sometimes informative. Let’s look at the S&P 500 in 2011. The average started the year with similar momentum and peaked in April at 1,337 (more than a 6% increase). By the end of 2011, the S&P was down 1.1% after a fairly volatile late summer run. That said, stocks are trading at a 14% discount to their average price-earnings ratio over the past five decades, according to Bloomberg calculations, and equities certainly look appealing. Against this, of course, are fears about possible contagion from ongoing problems in the Eurozone, the U.S. budget deficit, rising energy prices and the ripple effects of a China slowdown. As always, only time will tell.

While a development like the Dow reaching the 13,000-level is welcome, investors should remain watchful of the many issues that generated volatility in 2011 and the newly mounting concerns like China that may tip the scale further. A carefully considered long-term strategy is the key. If you have any questions or concerns about your portfolio holdings, or your overall financial plan, please call us.