Wall Street set to open higher on trade deal hopes

(Reuters) – U.S. stocks were set to gain for a third day on Tuesday, lifted by hopes that the United States and China would strike a deal to end their months-long trade war that has battered financial markets.

Futures pointed to a 0.8 percent ESc1 opening gain for the S&P 500 .SPX, with the index set to add to a 4 percent gain in the past two days, sparked by a strong jobs data and the Federal Reserve chief’s remarks that calmed worries that interest rate hikes would hurt growth.

A second day of U.S.-China trade discussions in Beijing extended into Tuesday evening, a source told Reuters after officials from both sides expressed optimism. U.S. President Donald Trump said in a tweet that talks with China are going “very well”.

“With the U.S. and China in talks to de-escalate their trade conflict, the central bank showing a willingness to slow its tightening cycle and the economy still performing well, the markets may be looking a little more attractive,” Craig Erlam, senior market analyst at Oanda in London, wrote in a note.

The meetings are the first face-to-face talks since Trump and Chinese President Xi Jinping agreed in December to a 90-day truce in a trade war.

Trade-sensitive stocks such as Boeing Co (BA.N), Caterpillar Inc (CAT.N) and 3M Co (MMM.N) rose between 1.2 percent and 1.6 percent in premarket trading.

Trade and concerns over slowing growth have been at the heart of a selloff at the end of 2018 that culminated in Wall Street posting its worst monthly performance in about a decade in December, driving down earnings estimate and stock valuations.

The S&P 500 .SPX hit a record high on Sept. 21 before tumbling about 20 percent to a 20-month low on Christmas Eve.

The index has climbed about 8.5 percent since then, with investors waiting for the fourth-quarter earnings season to kick off for a clear picture on how the trade war and a slowdown in global growth will affect profits.

Analysts estimate S&P 500 companies to increase their fourth-quarter earnings per share by 15 percent. That compares with expectations of 20 percent growth three months ago, according to Refinitiv IBES data.

(GRAPHIC: U.S. profit growth since 1968 – tmsnrt.rs/2RzHi55)

At 8:41 a.m. ET, Dow e-minis 1YMc1 were up 202 points, or 0.86 percent and Nasdaq 100 e-minis NQc1 were up 51 points, or 0.79 percent.

Amazon.com Inc (AMZN.O) was up 1.7 percent premarket, adding to Monday’s gains that helped the market power higher and the online retailer overtake Microsoft Corp (MSFT.O) to become Wall Street’s most valuable company. Microsoft was up 0.9 percent.

Though Monday’s rally was led by technology and internet stocks, Samsung Electronics’ (005930.KS) profit warning due to weak chip demand again turns the spotlight on growth in the sector after Apple Inc’s (AAPL.O) rare move to cut sales forecast.

Goldman Sachs said in a note it expects semiconductor companies to face a challenging year, particularly in the first half.

PG&E Corp (PCG.N) shares fell about 10 percent after S&P Global Ratings stripped the California power utility of its investment-grade credit rating and kept it under review for a further downgrade.

The shares have slumped about 22 percent since Reuters reported on Jan. 4 that the company was exploring filing for bankruptcy protection as it faces billions of dollars in claims from fatal wildfires in 2018 and 2017.

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