Market Insider

Here's what markets are looking for one week into Trump administration

President Donald Trump
Saul Loeb | AFP | Getty Images

Markets get a blast of economic news Friday, including fourth-quarter GDP, but the focus will be on what other actions President Donald Trump will take in his first week on the job.

Besides Trump, traders are looking for any clarity from congressional Republicans at a retreat in Philadelphia this week. Trump meets with U.K. Prime Minister Theresa May, his first official meeting with a world leader, and their comments on a trade deal and the U.K.'s exit from the European Union will be closely watched.

There are also a few big earnings including Chevron, Honeywell, UBS and American Airlines Group. Action from some of Thursdays' late earnings reports could also spillover Friday. Alphabet stock was lower in after-hours trading after missing earnings estimates.



Stocks ended Thursday mixed, but the Dow managed to close up 32 at 20,100, a new high the day after it first vaulted 20,000. The broke through 2,300 for the first time Thursday but fell back and closed 1 point lower at 2,296. Nasdaq was down 1 at 5,655. Treasury yields moved lower, as buyers moved into bonds. The 10-year yield was at 2.50 percent in late trading.

"We will have some data. The market will pay attention to it but will keep an eye on the retreat," said John Briggs, head of strategy at NatWest Markets. Briggs said comments from in Philadelphia affected the market Thursday, helping to send interest rates lower. Trump did not name any countries but said he would write future one-on-one trade deals that have "very, very strong controls over manipulation and devaluation, which they didn't have in TPP," the Trans-Pacific Partnership trade pact.

"I think some of the stuff about controls against currency manipulators … then this Mexico stuff. I would argue it's not anything we haven't heard before but we keep going back and forth on the latest tweet," said Briggs. He said he is watching to see if GOP lawmakers have any comments on tax reform, and the market will be on the lookout for any clarity on trade and tariffs. He said the market will start focusing on next week's Fed meeting, where it is not expected to take action but will issue a statement.

Trump was sworn in just a week ago Friday and has already taken many actions aimed at keeping his pledges to voters. He withdrew from the TPP trade pact, pushed forward the Keystone and Dakota Access pipelines, removed regulations on infrastructure projects, froze government hiring and signed an order to roll back Obamacare. He also signed orders aimed to stop illegal immigration, including a directive to build a wall on the Mexican border.

On Thursday, the Mexican peso got ripped against the dollar Thursday after President Enrique Pena Nieto announced on Twitter that he would not be attending a meeting with Trump next week. That followed a Trump tweet that said they should cancel the meeting if Mexico won't agree to pay for a wall along its border.

"The Treasury market in the beginning of the day was moving against stocks. I suspected there would be more of a reaction when the Mexican president canceled the meeting. … If you combine going after currency manipulators with really disrespecting the Mexican president, such that he wants to cancel a meeting, to me means we are already starting the trade war and that makes sense for Treasurys to rally. … It's not even a week yet," said Tom Simons, money market economist at Jefferies.

White House spokesman Sean Spicer also discussed the possibility of a 20 percent tax on Mexican imports Thursday to pay for the border wall, but the White House later clarified that that was not a proposal but one idea.

"Theatrics aside, the markets will have to make a decision at some point whether these headlines are negotiating positions or whether they are to be taken literally and to the extent that this impacts the global trade apple cart, it may well be fodder for a future rally in Treasuries," wrote BMO Capital strategists. "For now, risk appetite is stable and taking this in stride, but we recognize that this could change quickly. It reinforces our medium-term view for a rally and is one of the risks on our radar for 2017."

On the calendar Friday is fourth-quarter GDP, expected at 8:30 a.m. ET, as is the report on durable goods for December. Consumer sentiment is released at 10 a.m. ET. Other earnings expected Friday include Colgate-Palmolive, General Dynamic, NextEra Energy and BT Group.

"Trump is much more important than the data. The data has really consistently been telling us the same story," said Simons. "It's always interesting to see the first cut of GDP. It looks like it's going to be a reasonable quarter. We have 2.5 percent, a little stronger than the consensus."