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U.S. equities pushed higher again on Wednesday lifting the major averages to new record highs in drama-free trading. In the end, the Dow Jones Industrial Average gained 0.2%, the S&P 500 gained 0.1%, the Nasdaq Composite also gained 0.1%, and the Russell 2000 gained 0.2%. Treasury bonds were slightly weaker, the dollar extended its recent rebound, gold weakened 0.4%, and crude oil rallied 2.2%.
Breadth was mixed and volume slightly ahead of normal, at 109% of the NYSE’s 30-day average. Energy led the way with a 1.2% gain while utilities were the laggards, down 0.5%.
Finish Line Inc (NASDAQ:FINL) gained 6.5% after being upgraded to positive at Susquehanna on anticipation of an acquisition deal. Nordstrom, Inc. (NYSE:JWN) gained 6% after CNBC reported the founding family is in a deal to take the company private.
On the downside, iRobot Corporation (NASDAQ:IRBT) fell 15.7% on negative comments from Spruce Point Management related to the entry of SharkNinja products into the robo-vacuum market.
Western Digital Corp (NASDAQ:WDC) fell 3.4% as a Bain–Apple Inc. (NASDAQ:AAPL) consortium signed a non-binding agreement to buy Toshiba Memory for around $18 billion. And Avon Products, Inc. (NYSE:AVP) fell 1.9% on cautious comments from Jefferies analysts citing leadership changes and a revival plan that has yet to take hold.
On the economic front, there was softer Producer Price Inflation data raising the stakes for Thursday’s Consumer Price Inflation data release — upping the odds the Federal Reserve will hold off on another rate hike this year.
The big news driving stocks higher here isn’t the outlook for earnings or the economy. It’s growing hope for a bipartisan tax reform package as President Donald Trump hosted key Congressional Democrats at the White House tonight. After months of frustration with Republican leadership, Trump looks to be quickly pivoting to the left in an effort to push legislation through the Washington gridlock that was on display during the healthcare reform vote in the Senate, which was torpedoed by a single vote.
The latest is that he could trade a softer stance on immigration for a deal on tax reform that focuses on the middle class. This would not only pay dividends for consumers and the economy, but it would restore some faith and confidence in the apparatus of governance. Win, win, win.
The dollar is rallying in response, which is weighing gold and Bitcoin.
But remember: Sentiment is off-the-charts extreme, valuations are trying, the Fed is about to unleash quantitative tightening and seasonality is negative. Also, this is predicated on Trump getting along with Democrats; many of whom seem to think he is literally the second coming of Adolf Hitler.
Tax reform this way is possible, yet unlikely.
Check out Serge Berger’s Trade of the Day for Sept. 14.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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