Markets endured another volatile month with benchmarks remaining mixed at the end. Oil prices continued to dominate proceedings, falling through the first half of the month on discouraging data and the lack of consensus among major oil exporting countries on a production cut.

However, prices recovered during the second half as discussions on curbing supply seemed to be progressing in a positive direction. Domestic economic data was mixed in nature, showing signs of improvement toward the second half. However, earnings remained lackluster in nature and weighed on investor sentiment.

February’s Performance

For the month, the S&P 500 and Nasdaq declined 0.4% and 1.2%, respectively. The indexes posted losses for three straight months for the first time since Sep 2011. Meanwhile, Dow increased by 0.3% last month, its highest pace of increase since Nov 2015. Benchmarks ended the month mostly in the red due to volatile movement of oil prices, discouraging quarterly reports and mixed economic data.

Oil prices remained volatile during the month following uncertainty regarding possible production cuts. Moreover, doubt over Fed rate hike prospects and increasing oil loan defaults possibilities weighed on the key U.S. indexes. Lower-than-expected earnings results of major companies impacted the market negatively. However, Dow ended in the green for February due to broad-based reasons. Gains in Apple Inc. (AAPL – Analyst Report) also boosted the blue-chip index.

Some earnings results provided a certain amount of impetus to the markets. Better-than-expected GDP rate growth also boosted investor sentiment. However, a concurrent increase in inflation heightened rate hike fears.

Oil Prices Determine Market Direction

Once again, oil prices were the primary factor determining market movement. Prices declined during the first week of the month as prospects of production cuts by major oil producers declined. OPEC’s unwillingness to enter into any deal with Russia to control the supply glut reduced the possibility of a production cut. Iran is aiming to boost its output after sanctions were lifted and is not immediately ready to participate in any production cut.

Prices continued to fall during the second week due to persistent fears about the global supply glut. Further, Venezuela failed to convince Saudi Arabia to trim oil production levels on Sunday. On Feb 9, members of OPEC failed to come to an agreement regarding production cuts. As sanctions were lifted from Tehran, OPEC’s oil output increased.

As a result, the International Energy Agency (IEA) issued a warning about a further fall in oil prices. The U.S. Energy Information Administration (EIA) also projected that average gasoline prices at pumping stations will decline to $1.98 per gallon in 2016.

On Feb 11, the persistent decline in oil prices fueled investor worries. However, indexes recovered some gains after UAE’s oil minister said members of the OPEC are willing to cooperate to cut oil production. The WTI crude slumped below the $27 level – its lowest in 13 years.

Prices recovered during the second half of the month. Prices increased during the third week after Iran’s Oil Minister indicated that Iran is ready to support Saudi Arabia’s and Russia’s move to hold crude production in line. The oil price rise had a positive impact on energy stocks and eventually on the broad-based market.