Trump & Co. Put Currencies in Spotlight

January 26, 2018

Trump & Co. Put Currencies in Spotlight

More than anything, besides the Q4 earnings season, what’s been in the spotlight these past few days is the weakness of the dollar. After Trump’s Treasury Secretary, Mnuchin’s ill-fated comments about the administration’s desire to see a weak dollar, Trump – and Mnuchin – had no choice but to backtrack and change their narrative after what was probably no more than an errant slip of the tongue on the part of Mnuchin. Mnuchin, at Davos, had earlier bucked past administrations’ policy on the dollar, boasting in turn that America prefers a weak dollar because it strengthens multinational firms and exports. What Mnuchin failed to grasp is that a weak dollar weakens the average American investors – something any White House administration wants to avoid “taking credit” for. The irony of Mnuchin’s statement was all the more pronounced after Trump had ranted on the campaign trail about China’s artifice in weakening its own currency. Likewise, after Mnuchin’s comments, European countries sharply criticized the administration’s tipping the scales against the EU, which wants its members countries to compete against America on an equal playing field.

As we have noted earlier, with the market on a tear – possibly on a “melt up,” the thing that players have to be concerned about the most is international friction and conflict in global trade. Any hint of a trade war, could take the oxygen out of global growth, which would in turn hurt the market. With Trump’s “America First” policy, the president has indeed buoyed the market by redistributing wealth – cutting corporate taxes and adding to the wealth of the America’s wealthiest – but he has also started slapping on tariffs, just recently on washing machines and solar panels. And the questions is always, “What’s next?” Every country seeks to engage in some protective measures, and no country really fully adopts a Ricardian trade model that says everyone is better off when the cheapest producing country makes a respective good. But everyone – and that includes economists across the board – agree that the world economy is better off without trade wars, tariffs and secretive efforts to manipulate currencies and trade balances, especially when the world gets wind of such efforts after slips the likes of Mnuchin’s.

Intel (INTC) released its Q4 2017 results, noting that it anticipates no material financial impact from the recently revealed flaws in its chips – which have been given the names, Spectre and Meltdown. The company also shared that it was working to employ a hardware approach to lessen the vulnerability in the face of any potential attack. In the words of company, Chief Exec. Brian Krzanich, Intel will implement “silicon-based changes to future products that will address the Spectre and Meltdown threats in hardware and those products will begin appearing later this year.” Even after factoring in these needed changes, the company’s forecast easily beat expectations. At the same time, the company did revise its “risk factors statement.” In late trading, Intel shares rose – at times –  to highs not seen in 17 years, though prior to the extended-hour jump, stocks had been down 1.9% on the year, compared to the gains of 6.1% on the blue-chip Dow. Intel’s Q4 numbers reflected earnings of $1.08 per share, revenues coming out at $17.1 billion.

Market Summary: The Dow is up 1.44% over the last 5 trading days, the S&P 500 up 1.47% over the same time frame. The NASDAQ is up 1.58% over the last 5 days. Sectors on the S&P 500 ended mixed, telecom services performing the best over the last 5 trading days, with aggregate gains of 1.42%. Yesterday, utilities were up 0.88%, followed by consumer discretionary stocks which rose 0.40%. Energy stocks shed 0.54% and Consumer Staples slipped 0.48%.

Today’s Economic Calendar: Durable goods orders and GDP numbers will be released at 8:30.

Friday’s Hot Stocks: ETFC, WDC, ISRG, SBUX, INTC

Have a great trading day!

New York Strategy Swing