For the week, the DXY, essentially the USD/EUR exchange rate, closed at 100.53 on Friday, down another 0.16% for the week. The yield of 10-year U.S. Treasury Notes climbed 0.77% this week to close on Friday at 2.486%, while the yield spread between the 10-year and 2-year U.S. Treasury Notes narrowed to 1.27 percentage points.
The WTI crude spot price closed practically unchanged for the week at $53.17 per barrel on Friday, while the Brent crude spot price gained 0.2% for the week to close at $55.62 per barrel, despite that the EIA reported a larger-than-expected build in U.S. crude oil inventories and a continued increase in the oil rig count. According to CNBC, the Organization of the Petroleum Exporting Countries, or OPEC, said on Monday that it was near its target of cutting 1.8 million barrels per day, or bpd.
The WTI crude price surged almost 2.5% to an intraday high of $54.06 per barrel on Thursday, after Mexico’s President Enrique Peña Nieto told the White House that he canceled his meeting with President Trump that was scheduled for next week. In response, White House press secretary Sean Spicer told the media that the administration is considering a 20% tax on Mexican imports to help pay for the U.S.-Mexico border wall, according to Business Insider.
The Twitter brawl started when Mr. Trump sent out the tweet, “If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting.” Mr. Nieto tweeted back, "This morning we have informed the White House that I will not attend the meeting scheduled for next Tuesday with the POTUS.". Mexico’s President has said repeatedly that there is no way Mexico is going to pay for the wall.
Here is a take from Andurand Capital Management, a $1.6 billion London-based hedge fund firm, "If the tax is adopted, WTI could move to a $10 premium to Brent providing a substantial economic advantage to U.S. producers,"… "Such a tax would also increase domestic gasoline prices in the U.S.", according to Business Insider.
The EIA weekly U.S. oil inventory report on Wednesday showed that domestic crude supplies increased by another 2.8 million barrels to 488.3 million barrels, excluding the Strategic Petroleum Reserve, in the week ending January 20, compared to the S&P Global Platts forecast for a stockpile decline of 1.9 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory increase of 2.9 million barrels.
Separately, the EIA said the weekly U.S. crude oil production surged 17,000 bpd for the week ending January 20, to 8.961 million bpd. Weekly U.S. crude oil output has fallen about 6.75% from the peak level of 9.61 million bpd during the week ending June 5, 2015. Houston-based oilfield services company Baker Hughes Inc. said on Friday that the U.S. oil rig count jumped another 15 to 566, compared to 316, when the rig count hit the low on June 6, 2016.
S&P 500 Summary: +2.50% YTD as of 01/27/17
Barclay Hedge Fund Index: +0.01% YTD
Outperforming Sectors: Materials +6.37% YTD, Information technology +5.85% YTD, Consumer discretionary +4.56% YTD, and Industrials +3.11% YTD.
Underperforming Sectors: Financials +1.53% YTD, Healthcare +1.15% YTD, Consumer staples +1.04% YTD, and Real Estate –0.42% YTD, Utilities –0.44% YTD, Energy –1.82% YTD, and Telecommunication services –3.18%