RECAP: for the week ending Janunary 27th

January 29, 2017

Major indexes hit an all time high during midweek supported by hope for economic growth and positive earnings reports. The NASDAQ performed best but most attention was focused on the dow hitting 20,000. Over 100 S&P companies reported 4Q results last week. Good results on Tuesday from DuPont helped support materials, and strong reports from Boeing and Rockwell Automation on Wednesday seemed to bode well for the industrials and business services sector. An earnings miss from Alphabet, a large component of many major indexes, took some of the momentum out of the rally Thursday.
A good deal of investor attention also focused on President Trump’s actions in his first week in office. The president promised business leaders that he would reduce regulations by 75% and signed orders authorizing renewed construction on oil pipelines, but trade tensions with Mexico also escalated.

In Japan the Japanese stock market benchmarks rallied for the week. The widely watched the Nikkei 225 Stock Average advanced 1.7% (329 points) and closed at 19.467.40. Japanese exports rose 5.4% year-over-year in December—results that were much better than most economists had expected—as strong car parts and electronics sales powered the first gain in Japanese exports in 15 months. The report was good news for Japan’s export-dependent economy, especially given the recent rhetoric from President Trump on U.S. protectionism, which could crimp trade across the entire Asia/Pacific region. President Trump officially withdrew the U.S. from the Trans-Pacific Partnership (TPP) on Monday.

In China S&P Global Ratings kept its negative outlook on China, citing “gradually increasing economic and financial risks” that could lead it to downgrade the country’s credit rating this year or next, the agency said, even as it affirmed its sovereign credit ratings on China’s debt. Days earlier, Fitch Ratings said that China’s reliance on policies favoring short-term growth posed a growing risk to macroeconomic stability. The warnings from both agencies came a week after China reported 2016 gross domestic product growth of 6.7%—helped by the government loosening credit and ramping up spending following signs of economic weakness in early 2016. While the stimulus measures helped stabilize China’s economy there is speculation that China needs more structural reforms to ensure a successful transition to a slower pace of higher-quality growth.

Other news: The Mexican peso rose more than 1% on Friday after Donald Trump and Mexican President Enrique Peña Nieto spoke by telephone. During the call, the two reportedly discussed bilateral relations, including trade and arms trafficking. The call came one day after Peña Nieto canceled his Washington summit after the new U.S. president insisted that Mexico pay for the construction of a wall along the U.S.-Mexican border. On Wednesday, Trump made good on his campaign promise when he signed an executive order authorizing construction of the wall with federal money. The Trump administration said that it could finance the wall with a border-adjustable tax plan by imposing a 20% tax on Mexican imports. Mexican boycotts against U.S. companies have been growing this week, with ads calling on people to use their buying power to “punish companies that favor the politics of the new U.S. government.” Other messages have called for the boycott of specific American companies.

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