This is what traders will watch Thursday

Traders will be looking for economic data to continue to paint a positive story on the U.S. economy and cement the idea that the Fed will raise interest rates, by midyear if not sooner.

Two days of testimony this week from a more hawkish and confident Fed Chair Janet Yellen, and stronger-than-expected retail sales and consumer inflation data Wednesday, combined to move some expectations for a Fed rate hike slightly forward. JPMorgan, in fact, said it now sees the Fed hiking in May, rather than June, as most of Wall Street expects. Market expectations moved up slightly to about a 30 percent chance of a hike as early as March.

"[Yellen] made it very clear that the economic data matters, and the trajectory of monetary policy is predicated on better economic data, along with inflation moving higher. We're going to be watching the data releases that come out tomorrow," said Quincy Krosby, market strategist at Prudential Financial.

Thursday's reports include weekly jobless claims, housing starts and Philadelphia Fed manufacturing, all at 8:30 a.m. ET. There are also earnings reports from Alexion, , , Dean Foods, , Cabela's, GNC Holdings, Time and others before the opening bell. Con Ed, Allscripts Healthcare, WebMD, Yamana Gold and TrueCar, are among companies reporting after the close.

As Fed expectations have risen, so have Treasury yields, with the at 1.24 percent late Wednesday and the at 2.49 percent.

Stocks surged Wednesday, closing at a record high for a fifth day. The was up 11 at 2,349, while the was up 107 at 20,611. The was up 36 points at 5,819.

"Obviously all eyes are on the White House, who is going to be Labor secretary," said Krosby. Andrew Puzder withdrew, after it appeared he would be rejected by the Senate. Krosby said the market has chosen not to focus on controversies in the Trump White House, like the resignation of National Security Advisor Michael Flynn and reports about Trump campaign contacts with Russia.

"The market has just zeroed in on growth, pro-business, rolling back regulation and as long as the market believes this is his agenda, and he is going to follow through, the market has just embraced that," she said. "It's a market that for so many years has wanted a pro-business backdrop. It finally gets that, and I think it sees the issues coming from the White House, personnel issues, as just a zig with a zag," she said.

Krosby said it was a positive the the CBOE volatility index, jumped 11 percent Wednesday to just near 12. She said a higher VIX would remove some concerns that there is too much complacency in the market.

"Today the victory was for the financials, taking another leg up on the back of a higher 10-year yield and continued potential for scaled back regulation," she said. The S&P financial sector rose 0.7 percent Wednesday, and was up 3.1 percent week to date.

"Also the president seems to have moderated some of his views with regard to China. Those are the sort of things that have worried investors," she said, noting his friendlier tone with China and a report that he was not likely to label China a currency manipulator.