morning moneybeat us

on.wsj.com/MoneyBeatUSSignup

MARKET SNAP: At 6:00 a.m. ET, S&P 500 futures down 0.23%. Treasury yield flat at 2.04%. Nymex up 47 cents at $53.25; gold 0.33% lower at $1223. In Europe, FTSE 100 up 0.46%, DAX down 0.35% and CAC 40 down 0.16%. In Asia, Nikkei 225 down 0.10% and Hang Seng up 0.24%.

WATCH FOR: Empire manufacturing survey at 08:30 a.m. ET, NAHB housing market index at 10:00 a.m. ET and Treasury international capital flows at 16:00 p.m. ET.

THE BREAKFAST BRIEFING

Stocks are marching to a new beat in February.

Growth-sensitive sectors are leading this month after less risky, defensive stocks outperformed in January. Strong gains in materials, energy, consumer discretionary, techs and financials have lifted the S&P 500 5% in February, taking the index to its first record close of the year Friday.

These growth-oriented names are up mid- to high-single digits on the month after falling low- to mid-single digits last month. Financials, in particular, have staged a sharp rebound, rising more than 6% in February after tumbling 7% in January following disappointing earnings from the largest banks.

As we wrote in Thursday’s Morning MoneyBeat. stocks seem to have gotten their mojo back as some of January’s headwinds have weakened. This month has brought an upbeat read on the jobs market, better-than-expected corporate earnings and some stability abroad. Furthermore, oil has steadied and the U.S. dollar’s steep ascent has leveled off. Both of those weighed on stocks last month.

“[This] is providing a much better backdrop for focusing on fundamentals,” said Thomas Lee, managing partner at Fundstrat Global Advisors. “Stocks should be doing well.”

The fact that growth-oriented segments of the market are leading suggests there is more conviction behind the rally. These sectors usually do well when fundamentals, like the economy, are improving.

Mr. Lee is bullish on the sectors leading February’s rally for the rest of the year. His firm likes consumer discretionary stocks, techs and financials, which are up between 6% and 7% this month. Mr. Lee says a stronger labor market, easier credit standards and the tailwind from lower gas should all help the consumer names. When it comes to tech, he notes the industry has fair valuations and it has done a decent job of producing profit growth even amid a rising U.S. dollar. Mr. Lee says the case for banks is they are reasonably priced and should do well on an accelerating U.S. GDP growth outlook.

To be sure, Mr. Lee is among the most bullish strategists on Wall Street. He is forecasting the S&P 500 will end almost 13% higher on the year. Strategists at Goldman Sachs, on the other hand, only expect the S&P 500 to rise 2% this year with a 12-month target of 2100 for the index. The average call across Wall Street is for stocks to gain about 8% in 2015 .

Goldman joins Mr. Lee in recommending tech stocks, saying they provide an attractive combination of value and high returns of capital and tend to outperform during times of above-trend growth. Goldman, however, thinks banks will underperform, citing an unfriendly interest rate environment for most firms. It expects industrials to lag too, noting high valuations and slowing sales growth associated with falling oil-linked capital expenditures.

Morning MoneyBeat Daily Factoid: On this day in 1801, Thomas Jefferson was elected third President of the U.S. in an appointment that constituted the country’s first peaceful transfer of power from one political party to another. While in office, President Jefferson cut the national debt by a third, acquired the Louisiana Territory and sponsored the Lewis and Clark expedition. He was overwhelmingly reelected for a second term in 1804.

-By Kristen Scholer

STOCKS TO WATCH

MGM is projected to report fourth-quarter earnings of 6 cents a share, according to a consensus survey by FactSet.

Fossil is forecast to post fourth-quarter earnings of $3.07 a share.

AMC Entertainment is likely to post earnings of 21 cents a share, while Goodyear Tire & Rubber Co. is projected to post earnings of 60 cents a share.

MUST READS (LINKS)

Greek Bailout Talks Break Down: Talks over how to keep Greece afloat broke down abruptly Monday, demonstrating a wide gulf between Athens and its European creditors and triggering a heightened state of uncertainty about the country’s future inside the currency bloc.

European Stocks Fall . European stocks came under fresh pressure Tuesday, a day after high-stakes talks between Athens and eurozone finance ministers collapsed abruptly, sparking fresh doubts over Greece’s future inside the currency bloc.

Ukraine Truce Fades in Fight for Town: Fighting for Debaltseve has become the biggest challenge to the cease-fire that went into effect at midnight Saturday and was supposed to end months of conflict.

U.S. Regulators Revive Work on Incentive-Pay Rules: U.S. financial regulators are focusing renewed attention on Wall Street pay and are designing rules to curb compensation packages that could encourage excessive risk taking.

Dollar’s Rise Papers Over Miners’ Woes: Falling commodity prices notwithstanding, companies don’t intend to cut production, saying the stronger dollar is cushioning the blow.

Port Delays Starting to Damage Businesses: As employers at the ports along the West Coast refused to unload ships for the sixth day out of the past 10, their nine-month contract dispute with port workers is becoming a significant business problem.

U.S. Regulators Revive Work on Incentive-Pay Rules: U.S. financial regulators are focusing renewed attention on Wall Street pay and are designing rules to curb compensation packages that could encourage excessive risk taking.

Money Flows Out of China: Despite a record trade surplus and a steady inflow of investment capital, China’s banks posted net sales of foreign exchange in January, suggesting that capital was flowing out of the country during the month.

Chinese Firms Tiptoe Into Europe’s Financial Sector: Chinese investors, who got burned investing in big European banks during the financial crisis, are refocusing on a new target: small, struggling finance companies.d raising short-term interest rates at midyear by altering their pledge to be “patient” before making a move.

Antitrust Paradox Hangs Over Expedia-Orbitz Deal: Expedia’s deal to buy rival Orbitz makes it one of the most acquisitive online travel companies, but it wasn’t long ago that it was warning regulators against a deal in the industry.

Cleveland Fed President Sees June Increase as Viable:  Cleveland Fed President Loretta Mester is joining a chorus of central-bank officials who want to take a tentative step toward raising short-term interest rates at midyear by altering their pledge to be “patient” before making a move.

Coffee Consumption Expected to Jump: Demand for coffee beans is expected to jump as consumption picks up in places such as China, India and Latin America.