U.S. stocks closed in the green this week following a better-than-expected January employment report that handily topped consensus estimates, even though wage growth disappointed slightly.
"This is good for corporations because it shows that they are hiring more people and growing while paying low wages," said Phil Davis, founder of Philsstockworld.com. He said that "0.1 percent wage inflation for the month translates to 1.2 percent per year, which is nothing."
The Dow Jones industrial average closed back over 20,000 Friday for its best day of 2017, on the back of Visa, which reported blowout earnings after the market close Thursday.
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Meanwhile, the Nasdaq Composite Index closed at an all-time high as tech earnings mostly continued to beat estimates this week.
Deregulation
Financials led market gains after reports that President Donald Trump and his administration announced steps to roll back regulatory laws contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act that was enacted in the wake of the 2008 financial crisis. Morgan Stanley, Citigroup, Goldman Sachs, JPMorgan and Bank of America all rallied on the news by nearly 2 percent.
The administration also wants to delay and review for the next 90 days a regulation designed to force retirement advisers to work in the best interest of their clients. That "fiduciary rule" is set to take effect in April. Gary Cohn, director of the White House's National Economic Council and a former executive at Goldman Sachs, told CNBC that the rule was "completely misintended."
Online brokers such as TD Ameritrade, E*Trade and Charles Schwab and mutual fund firms T. Rowe Price and Legg Mason moved higher on the move to repeal the rule.
Investor focus
While financials celebrated the latest executive order on Dodd-Frank, business leaders were increasingly divided on the new administration's approaches to taxes and immigration, particularly tech companies, which are the most concerned about the travel ban announced last week. Investors were looking for clarity as well.
"Equity investors have been clamoring for specifics on the timing and details of Trump's tax plans — which simply aren't available to know just yet and seem likely to remain unknowable for quite some time — and have been struggling to understand the implications of some of the pieces of tax reform being floated for the companies they follow [in particular, border adjustment]," Credit Suisse analysts said in a research report. "Meanwhile, more controversial issues with less clear implications for the broader equity market have moved into the national spotlight, like health care policy, immigration and global trade policy."
Trading week ahead
The earnings parade marches on with mostly retail, industrial and material companies on tap, as well as Twitter.
While China will begin to report its January 2017 data set after the Lunar New Year holiday, there are few if any potentially market-moving data reports on tap in the U.S., Europe or Japan next week.
A handful of Federal Reserve speakers will be on the circuit, and the U.K. Parliament will continue to debate and then vote next week on whether to trigger Article 50 and start the process of leaving the European Union.
As of now, traders have completely shifted their focus to what Trump and his administration will be doing on a macro level and what specific sectors will be affected.
"You really have to be on your toes to trade this market," Davis said. "There is the potential for volatility in this market, and you have to be on top of the news and pay attention for what's coming out of Washington."
