U.S. equities rebounded on Thursday on renewed hopes of a healthcare reform compromise and tax reform in Washington — thus, reinvigorating the “Trump-flation” trade.
In the end, the Dow Jones Industrial Average gained 0.9%, the S&P 500 added 0.8%, the Nasdaq Composite gained 0.9% and the Russell 2000 put on 1.3%. Treasury bonds were weaker, the dollar was stronger, gold was little changed and oil was unable to rebound from Wednesday’s selloff falling another 0.3%.
Breadth was heavily positive, with 2.5 advancing issues for each decliner on the New York Stock Exchange while volume was 106% of the 30-day average. Financial stocks led the way with a 1.6% gain while yield-sensitive utilities were the laggards, down 0.4%.
Bedmaker Select Comfort Corp (NASDAQ:SCSS) gained 28.3% on a surprise first-quarter earnings beat on revenues that were 6% ahead of estimates. Gross margins climbed 3.4% from last year. And forward guidance was raised 6%. American Express Company (NYSE:AXP) gained 5.9% on a top- and bottom-line beat on higher net interest margins and increased forward guidance.
On the downside, eBay Inc (NASDAQ:EBAY) lost 3.9% on an earnings miss with revenues 6% below estimates, disappointing turnaround expectations with the stock up 14% year to date.
Overall, according to FactSet the blended S&P 500 Q1 earnings growth rate stands at 9.4%, up from the 9.2% at the end of last week and the 9.0% expected at the end of the quarter.
Turning back to Washington, political coverage focused on a potential mending of the rift between conservative and moderate Republicans in the House of Representatives over legislative efforts to reform the healthcare system. The leadership is reportedly eyeing a vote next Wednesday. Treasury Secretary Mnuchin was also out taking up tax reform efforts, which is says will be done “soon” — weeks after President Trump himself said we would see something within the month.
Before all that can happen, however, Trump faces the prospect of a government shutdown over his efforts to fund increase military spending and the construction of the border wall.
Crude oil also continues to weaken on a drip-drip loss of confidence in OPEC’s production freeze agreement. The oil sheiks are out talking up a possible extension of the supply cap deal at their upcoming meeting in May.
But with U.S. shale production ramping and inventories bloated, it’s clear they’re losing control of the situation as their market share melts away.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers. Redeem by clicking the links above.