Trump in Davos, GDP in America — What you need to know in markets on Friday

Myles Udland
Markets Reporter

In what’s already been a busy week for markets and the economy, Friday will be a big, news-heavy finale.

In the morning, investors will contend with a speech from President Donald Trump at the World Economic Forum in Davos while the first estimate of U.S. economic growth in the fourth quarter will also be released.

This speech from Trump will follow comments from the President on Thursday that moved the dollar higher, telling CNBC in an interview that, “ultimately I want to see a strong dollar.”

U.S. President Donald Trump arrives at the Congress Center during the annual meeting of the World Economic Forum, WEF, in Davos, Switzerland, Thursday, Jan. 25, 2018. (Gian Ehrenzeller/Keystone via AP)

Trump’s comments followed market-moving comments from Treasury Secretary Steven Mnuchin on Wednesday that the weak U.S. dollar would be a positive for the U.S. economy. Given the Trump administration’s fixation on lowering trade deficits, however, a weak dollar would be succeeded in meeting this economic goal.

Meanwhile, investors back in the U.S. will be tracking the first estimate of fourth quarter GDP, due out at 8:30 a.m. ET. This report should show the economy grew at a pace of 3% in the final three months of 2017.

In a note to clients earlier this week, Joe LaVorgna, chief economist for the America at Natixis argued that some economic inputs to the GDP number point to the economy growing in excess of 4% during the quarter.

LaVorgna pointed to the retail control numbers, a demand-side input to GDP that grew at an 8.9% annualized rate during the fourth quarter, the most since 2003. Meanwhile, the index of hours worked, a supply-side input, expanded at a 2.5% annualized pace, the second-best since 2014. Taking these together, LaVorgna says, “they point to real GDP growth well in excess of 4%.”

“Moreover,” LaVorgna adds, “the economy also likely benefited from rebuilding efforts post-Hurricane Harvey, so a figure that is ultimately near 5% cannot be rule out. While this is unambiguously good news for Main Street, we are worried the Fed may feel compelled to raise rates more aggressively this year.”

On the earnings side on Friday, the highlights are expected to be results from Honeywell (HON), AbbVie (ABBV), and Colgate-Palmolive (CL).

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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