Stock superfecta: 4 U.S. indexes top records

Wall Street on Monday didn't just cash in on one winner, or a daily double, or even a trifecta. It notched a stock market-style superfecta, with all four major U.S. stock indexes -- representing blue chip names, technology stocks, small caps and large-company stocks -- all closing at record highs on the same day for the first time in 17 years.

The post-election rally began two weeks ago with so-called "Red Stocks" ripping higher after Republican Donald Trump's surprise win on Nov. 8. The rally, which has been fueled by hopes that the president-elect's growth-friendly policies will finally jolt the U.S. economy out of its multi-year doldrums, has spread to virtually every corner of the stock market.

All-time highs were in abundance to start the week: Blue chips in the Dow Jones industrial average closed up 89 points to a record 18,956.69, extending its 2016 gain to nearly 9%. The benchmark Standard & Poor's 500 finished 0.8% higher at 2198.18, its highest close ever. The tech-packed Nasdaq composite rallied 0.9% to a record 5368.86. And the Russell 2000, a stock index filled with the market's smallest companies, extended its winning streak to 12 sessions on its way to an all time record close of 1322.23 and a 16.4% gain for the year. That is the Russell 2000's longest winning streak since June 2003.

"It is the first time the S&P 500, Dow, Russell 2000, and Nasdaq all closed at a new high on the same day since Dec 31, 1999," says Ryan Detrick, senior market strategist at LPL Financial.

The surge in stock prices is being driven by hopes that Trump's plans to slash taxes, rid businesses of costly rules and regulations, and spend billions to fix the nation's crumbling roads and bridges will produce a spike in economic growth sizable enough to put even more Americans to work, put more cash in their pockets and boost the profitability of U.S. companies of all shapes, sizes and specialties.

Stocks jump as Dow, S&P 500, Nasdaq, Russell 2000 close at records

"The stock market is viewing the new (Trump) administration as friendly toward business," says Bruce Bittles, chief investment strategist at Baird. "This is 180 degrees from what markets have experienced the past eight years. It is a vote of confidence for the new administration."

Bittles says stocks are also getting a boost from a massive shift of investors' cash from bonds to stocks and a tailwind from the seasonally bullish part of the year.

Ironically, the stock rally comes at a time when headwinds that would normally spook markets have begun popping up. The Federal Reserve, for example, has all but said it will increase short-term interest rates for the first time this year when it meets in mid-December. And the prospect of a Fed hike is already causing bond investors to bail out of long-term U.S. government bonds, pushing yields on the 10-year Treasury note, back above 2.3% to a nearly one-year high.

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Trump's plans to cut taxes and spend billions on infrastructure is also seen as nudging inflation and the U.S. budget deficit higher. That expected reaction caused traders to push the value of the U.S. dollar up versus a basket of foreign currencies for 10 straight sessions before the greenback retreated Monday. A stronger dollar hurts U.S. multinationals, as it makes products sold abroad more expensive, pressuring their sales and profits.

What's more, all of the gains have come before a single one of Trump's policies has been implemented. Trump won't even take over the White House until after Inauguration Day on Jan. 20.

At some point, the so-called Trump rally will need to move from "hope" to real policies that move the economic needle in a positive direction, says Michael Cuggino, president and portfolio manager at Permanent Portfolio Funds.

"We don’t know anything factually about Trump's policies," Cuggino told USA TODAY. "The stock rally is based on hope and optimism."

For the rally to stick, adds Cuggino, "(Investors) will need to see the (hoped-for improvement in) business translate into both economic and earnings growth."