Like manna from heaven, investors were seemingly gifted another new record high for the Dow Jones Industrial Average on Friday. The 11th record in a row, a run matching the January 1987 run for the best-ever streak in the index's more than 100 year history, looked like a long shot as stocks traded with a loss of around 60 points for most of the day.
But then, as if powered by divine providence, a melt up in the last hour of trading pushed the average into the green and onto another new all-time high. In fact, the Dow pushed into the green in the final minute of trading. Fair and efficient markets, right?
In the end, the Dow gained just a fraction, the S&P 500 gained 0.1%, the Nasdaq Composite gained 0.1% and the Russell 2000 lost a fraction. Treasury bonds were stronger across the curve - a safe haven bid that bests characterizes the tone of the day's trade. The pushed the 30-year Treasury yield below 3%. The dollar strengthened, gold gained 0.6% and crude oil lost 0.8% on lingering concerns about inventories and U.S. shale output.
Continuing the defensive theme, yield-sensitives led the way the utilities up 1.4%, telecoms up 0.7%, and REITs up 0.5%. Energy and financials were the laggards, down 0.9% and 0.8%, respectively.
High-end home furnishings retailer Restoration Hardware (NYSE: RH ) surged 24.4% on a preannounced Q4 earnings beat and a $300 million buyback authorization. Nordstrom, Inc. (NYSE: JWN ) gained 5.7% on a comp-store decline wasn't as bad as feared.
On the downside, JCPenney Company Inc (NYSE: JCP ) fell 5.8% after reporting an earnings beat as investors frowned on a weaker-than-expected comp-store sales and soft guidance.
Wall Street continues to focus on the growing realization that President Trump's desire for tax reform, infrastructure spending, and Obamacare replacement will likely be longer in coming than originally envisioned. Issues like a border tax remain in flux. And with the debt ceiling approaching fast, fresh attention is being paid to the fiscal implications of these policies at a time when the budget deficit, given a national debt swelling towards $20 trillion, is increasingly being driven by rising interest service costs.
And this is all happening within the context of analyst markdowns of 2017 S&P 500 earnings growth expectations, rising inflation pressure, and an increasingly hawkish Federal Reserve that could well raise interest rates again next month. The "hard" economic data remains weak as well, from gasoline demand to housing activity.
While the Dow overall was made to look like it shrugged off these concerns, under the surface there is clear evidence of rising stress. After 15 straight days higher, technology stocks suffered their worst day of the year.
Financials suffered their worst day in five weeks. Gold rose above the $1,250 level for the first time since the election, up eight of the last nine weeks. Silver is up nine weeks in a row for its best run since May 2006. Bitcoin just hit a new record high.
I recommend a cautious approach with valuations stretched and the market's "winning streak" becoming increasingly fragile and vulnerable. Focus on positions like Treasury bonds, with the ProShares Ultra Treasury Bond (NYSEARCA: UBT ) up 2.5% for Edge subscribers today.
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