U.S. stocks closed at fresh highs Wednesday for a fifth-straight day as traders continued to bet on a pro-growth agenda under President Donald Trump.
"The market reacts positively when we think we're getting close to" a policy announcement, said Art Hogan, chief market strategist at Wunderlich Securities. "As long as we stay focused on that, the market is going to continue to go higher."
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The president continued to tout his economic agenda in a meeting with retail CEOs Wednesday.
The Dow Jones industrial average added 107 points with Procter & Gamble contributing the most to gains. Shares rose 3.7 percent after CNBC reported late Tuesday, citing sources, that Nelson Peltz's Trian Fund Management has taken a stake in Procter & Gamble and the funds' current position is worth roughly $3.5 billion.
Official filings released Tuesday also showed several major U.S. hedge fund investors moved significant parts of their portfolios into financial and pharmaceutical stocks.
Health care climbed nearly 1.2 percent Wednesday to lead the S&P 500 higher in the close.
The financials sector closed up 0.7 percent as the third-best performer remains the top gainer in the S&P 500 since election with gains of more than 22 percent. The SPDR S&P Regional Banking ETF (KRE) hit at an all-time high.
"We're halfway through the first quarter and ... people have to chase performance," said Peter Coleman, head trader at Convergex.
"At the end of the day, the sentiment is you're going to get some tax reform and some infrastructure policy," he said.
On Wednesday, Trump said the administration remains "focused on the issues that will bring economic growth. That's what we're all about."
The SPDR S&P Retail ETF (XRT) closed up 0.9 percent with the largest market-cap stock, Amazon.com, closing three-quarters of a percent higher. Groupon led advancers, surging 23 percent after reporting a strong quarter.
Stocks had closed at record highs again on Tuesday, lifted by the financials sector, which received a lift from higher interest rates. The major U.S. stock indexes had traded mostly sideways this year, until Trump said last week the administration will be releasing a "phenomenal" tax plan in the next two-to-three weeks.
"I think what may have started off as short covering, then a short squeeze, has brought in some money off the sidelines into the more cyclical areas of the market," said Robert Pavlik, chief market strategist at Boston Private Wealth.
The initial pop in equities following Trump's election was mostly spurred by hopes of infrastructure spending, deregulation and lower corporate taxes. But the transition into Trump's presidency has been bumpy.
On Monday, Trump's National Security Advisor Michael Flynn resigned from his post after days of speculation about his status within the administration and intense scrutiny into his discussions about Russia prior to Trump's inauguration.
"The market has been surprisingly generous to Trump," said Randy Frederick, vice president of trading and derivatives at Charles Schwab. "If we learn that Trump did something unethical ahead of the election, then that would have some impact. But barring something of that magnitude, I think the market will continue to shrug off those issues."
In economic news Wednesday, the consumer price index (CPI) rose a more-than-expected 0.6 percent in January, the largest monthly gain since February 2013. In the 12 months through January, the CPI increased 2.5 percent, the biggest year-on-year gain since March 2012.
After the inflation report, Goldman Sachs and JPMorgan economists increased their expectations for a rate hike as soon as March or May.
U.S. Treasury yields spiked following data releases, with the benchmark 10-year note yield breaking above 2.5 percent, while the shorter-term climbed to 1.26 percent.
The U.S. dollar traded lower against a basket of currencies, with the euro near $1.06 and the yen around 114.1 yen against the greenback.
Retail sales also beat expectations, with the headline number showing a 0.4 percent rise for January after an upwardly revised 1 percent gain in December. The so-called core retail sales, excluding automobiles, gasoline, building materials and food services, posted a 0.4 percent rise.
"This market, for a long time, was hungry for a growth story," said Jim Davis, regional investment manager for The Private Client Group of U.S. Bank. "Every time we get a number supporting that, more people jump on the bandwagon."
Meanwhile, Federal Reserve Chair Janet Yellen testified in front of Congress for the second straight day. She acknowledged the economy is weak, but Fed policies have helped and the economy is close to achieving the Fed's goals on employment and inflation.
On Tuesday, Yellen lifted market expectations for a March rate hike after saying it would be "unwise" for the Fed to wait too long.
"Our view is the over/under on rate hikes for this year is at two. But the data continue to come in stronger," said Michael Collins, senior investment officer at PGIM Fixed Income. "I think it gives the Fed more room to act how they've communicated."
"But there are still a lot of risks in the global economy, and in the U.S. there is some policy risk," he said.
Other data released include business inventories for December, which rose 0.4 percent, and the February read on U.S. home builder sentiment, which showed a decline.
"You can see that the picture is changing as inflation has picked up over in China and this is having a more prominent impact over in the U.S.," said Naeem Aslam, chief market analyst at Think Markets, in a note. "The U.S. retail sales data was hot and it tells us how much investors are willing to dig deep into their pockets and how confident they are in their spending attitude."
The closed up 11.67 points, or 0.5 percent, at 2,349.25, with health care leading seven sectors higher and utilities the greatest laggard.
The Nasdaq composite gained 36.87 points, or 0.64 percent, at 5,819.44.
Advancers were a step ahead of decliners on the New York Stock Exchange, with an exchange volume of 844 million and a composite volume of about 3.8 billion in the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose to trade near 12, its highest since Feb. 2.
Gold futures for April delivery settled up $7.70 at $1,233.10 an ounce.
U.S. crude oil futures for March delivery settled down 9 cents at $53.11 a barrel.
—CNBC's Everett Rosenfeld and Reuters contributed to this report.
On tap this week:
Earnings: Time Inc, Alexion, GNC, Cabela's, MGM Growth, PG&E, Con Ed, WebMD
8:30 a.m. Jobless claims
8:30 a.m. Housing starts
8:30 a.m. Building permits
8:30 a.m. Philadelphia Fed survey
Earnings: Fluor, Bloomin' Brands, Moody's, VF Corp, Allianz