U.S. equities finished higher again on Wednesday for the seventh straight gain as the “Trumpflation” rally shows no signs of slowing despite extreme sentiment, extended technical measures and narrowing market breadth. All the major averages notched a new record high to boot.
As a result, it’s not been nearly 90 days since investors had to suffer so much as a 1% decline. Life is hard, you know.
In the end, the Dow Jones Industrial Average gained 0.5%, the S&P 500 wafted up 0.5%, the Nasdaq Composite added 0.6% and the Russell 2000 gained 0.5%. Treasury bonds were weaker across the curve, the dollar was lower, gold gained 0.6% and oil was weaker finishing with a 0.2% loss.
Healthcare stocks led the way with a 1.2% gain with consumer staples and financials following. Utilities, energy and REITs were the laggards.
Groupon Inc (NASDAQ:GRPN) surged 23.3% thanks to a fourth-quarter earnings beat with revenues 2% ahead of estimates. Sodastream International Ltd (NASDAQ:SODA) gained 4.6% on a top- and bottom-line beat with sales in Western Europe a bright spot. Procter & Gamble Co (NYSE:PG) rose 3.7% after Nelson Peltz’s Trian Fund Management disclosed a $3.5 billion stake, the largest ever position in a company for the activist investor. PG has had trouble recently as its efforts to streamline have failed to move the stock. Southwest Airlines Co (NYSE:LUV) gained 3.6% after 13F filings showed Warren Buffett accumulating a position.
On the downside, Fossil Group Inc (NASDAQ:FOSL) fell 14.8% after a messy Q4 report with below-consensus revenues and weak profit margins as watch sales remain soft and the “Wearables Revolution” has been a disappointment. LendingClub Corp (NYSE:LC) fell 4.7% on slightly better Q4 results as investors worried about weaker-than-expected loan originations and weak forward guidance.
A batch of strong economic data seemed to be the main catalyst for the day, confirming real growth and inflation is heating up.
Headline retail sales rose 0.4% in January over December pushing the annual rise to levels not seen since 2014. Headline consumer price inflation jumped 0.6% month-over-month — double the expected gain — for the hottest print since February 2013. On an annual basis, inflation is rising at a 2.5% clip (hottest since March 2012) putting increasing pressure on the Federal Reserve to raise interest rates again. And finally, the February Empire State manufacturing survey increased to its strongest print since September 2014.
On the political front, attention was paid to President Trump’s reiteration that his tax reform plans are forthcoming and would “substantially” lower rates for consumers and businesses.
While stocks remain in melt up mode, further evidence of vulnerabilities appeared today as the CBOE Volatility Index (INDEXCBOE:VIX), known as Wall Street’s “fear gauge” since it reflects options premium pricing, rose 11.5%. Normally, when stocks rise the VIX falls. In fact, the VIX closed above its 50-day moving average for the first time since December — bolstering the new March $18 Short-Term VIX (NYSEARCA:VXX) calls recommended to Edge Pro subscribers to a gain of nearly 10%.