While you were sleeping: UPDATED US consumer boosts Wall Street rally

Wall Street moved to fresh record highs after US reports showing a larger than expected increase in retail sales, while consumer prices rising at the fastest clip in nearly four years underpinned the outlook for growth in the economy and corporate profits.

A Commerce Department report showed retail sales rose 0.4% in January, following an upwardly revised pace of 1.0% in December.

Separately, a Labor Department report showed the consumer price index climbed 0.6% last month, following a 0.3% increase in December.

"The US economy has quite a bit of momentum," Jennifer Lee, a senior economist at BMO Capital Markets in Toronto, told Reuters.

"This morning's reports add a little more impetus for the Fed to move this quarter. Still not our call but it is becoming very interesting."

Federal Reserve chairwoman Janet Yellen, in testimony to Congress on Tuesday and again on Wednesday, signalled the central bank will raise interest rates in the coming months.

Traders are pricing in a 59% chance the Fed will raise rates by May and 78% by June, according to futures prices, Bloomberg reported.

"Inflation is getting closer to the Fed's goal," Scott Brown, St. Petersburg, Florida-based chief economist for Raymond James Financial, told Bloomberg.

"This is a green light for the Fed to raise rates in coming months."

Dow adds another 107 points
At the close of trading in New York, the Dow Jones Industrial Average was up 107.45 points, or 0.5%, to a new high of 20,611.86. The Nasdaq Composite Index rose 0.6% to 5819.44 and the Standard & Poor's 500 Index gained 0.5% to 2349.25 – both also a record levels.

Advances in Procter & Gamble and Pfizer shares, up 3.2% and 1.6% respectively, led the gains in the Dow. JP Morgan gained 0.9% to lead financial stocks.

Bucking the trend, PepsiCo shares fell after the company offered an outlook that fell short of expectations as chief executive Indra Nooyi warned of "continued macroeconomic challenges."

The company says it expects core earnings of $US5.09 a share in 2017. While that's an increase from $US4.85 a share in 2016, it fell short of analysts' estimates for $US5.15.

PepsiCo shares closed 0.3% weaker at $US106.73 after earlier rising as high as $US107.25 and dropped as low as $US104.77.

The yield on the 10-year Treasury note rose to 2.509% from 2.470% on Tuesday. 

Danone shares weaken
In Europe, the Stoxx 600 Index finished the day with a 0.3% gain from the previous close. Germany's DAX Index added 0.2%, the UK's FTSE 100 Index rose 0.5%, and France's CAC 40 Index increased 0.6%.

Shares of France's dairy giant Danone closed 0.2% weaker in Paris.

It said it was aiming to cut costs by €1 billion ($1.5 billion) by 2020 as the world's top yoghurt maker predicted profit growth to ease this year as "economic conditions will remain particularly volatile and uncertain overall."

"The challenges we faced [in 2016], including a slower turnaround of dairy in Europe and major market volatility, are a clear case to step up in our ability to seize consumer opportunities and improve our efficiency," CEO Emmanuel Faber said in the statement.

Danone said it was targeting earnings per share growth of more than 5% for 2017. Last year its EPS increased 9.3%.

The company said it would review its annual targets following the closing of its $US10 billion WhiteWave Foods acquisition, expected in the first quarter.

(BusinessDesk)