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Lack Of Breakthrough In Trade Talks May Lead To Pullback On Wall Street

(RTTNews) - The major U.S. index futures are pointing to a lower opening on Thursday, with stocks likely to give back ground following four consecutive sessions of gains.

While optimism about trade talks between the U.S. and China contributed to the recent strength on Wall Street, traders may cash in on the gains as assessments of the three-day meetings showed no significant breakthroughs.

A statement from the office of U.S. Trade Representative Robert Lighthizer said the meetings were held as part of an agreement between President Donald Trump and Chinese President Xi Jinping to engage in 90 days of negotiations with a view to achieving needed structural changes in China.

The statement said the talks included discussions on China's pledge to purchase a substantial amount of U.S. goods and services but did not provide details about the tone or outcome of the meetings.

"The United States officials conveyed President Trump's commitment to addressing our persistent trade deficit and to resolving structural issues in order to improve trade between our countries," the statement said.

The statement indicated the delegation led by Deputy U.S. Trade Representative Jeffrey Gerrish will now report back to receive guidance on the next steps.

Meanwhile, a statement from China's Commerce Ministry described the talks as "extensive, in-depth and detailed" and said the meetings "laid a foundation for the resolution of each others' concerns."

The comments do not dash hopes for a long-term trade deal between the U.S. and China, but traders were likely looking more concrete results.

Stocks fluctuated over the course of the trading session on Wednesday but largely maintained a positive bias on the day. With the upward move, the major averages closed higher for the fourth consecutive session.

The major averages ended the day firmly in positive territory but off their highs of the session. The Dow climbed 91.67 points or 0.4 percent to 23,879.12, the Nasdaq advanced 60.08 points or 0.9 percent to 6,957.08 and the S&P 500 rose 10.55 points or 0.4 percent to 2,584.96.

The markets continued to benefit from optimism about a potential trade deal between the U.S. and China after talks between U.S. and Chinese officials were extended to a third day.

Officials have not made public comments about the outcome of the talks, although traders remain hopeful the U.S. and China will reach a long-term trade agreement before a March 1st deadline.

Stocks remained mostly positive after the minutes of the latest Federal Reserve meeting confirmed Fed Chairman Jerome Powell's recent remarks suggesting the central bank will take a patient approach to further interest rate increases.

The minutes of the Fed's December meeting said participants saw the appropriate extent and timing of future rate hikes as less clear than earlier, said.

The Fed decided to raise rates by a quarter point at the meeting, but the minutes suggest volatility in financial markets and increased concerns about global economic growth have clouded the outlook for rates.

"Against this backdrop, many participants expressed the view that, especially in an environment of muted inflation pressures, the Committee could afford to be patient about further policy firming," the minutes said.

A number of participants noted it was important for the FOMC to assess the impact of increasingly pronounced risks and the effects of past rate hikes before making further changes to the stance of monetary policy.

The patient approach espoused by the minutes is similar to remarks Powell made during a joint discussion with former Fed Chairs Janet Yellen and Ben Bernanke last Friday.

Benefiting from a sharp increase by the price of crude oil, oil service stocks showed a substantial move to the upside over the course of the trading session.

Reflecting the strength in the sector, the Philadelphia Oil Service Index soared by 2.7 percent to its best closing level in almost a month.

Housing stocks also saw considerable strength on the day, resulting in a 2.6 percent spike by the Philadelphia Housing Sector Index. The index ended the session at a one-month closing high.

Significant strength was also visible among semiconductor stocks, as reflected by the 2.5 percent jump by the Philadelphia Semiconductor Index.

Skyworks Solutions (SWKS) posted a strong gain even though the maker of high-performance analog semiconductors lowered its fiscal first quarter guidance due to unit weakness across its largest smartphone customers.

Steel, computer hardware, and transportation stocks also moved notably higher, while telecom stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are sliding $0.56 to $51.80 a barrel after spiking $2.58 to $52.36 a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,292.30, up $0.30 compared to the previous session's close of $1,292. On Wednesday, gold climbed $6.10.

On the currency front, the U.S. dollar is unchanged compared to the 108.17 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1522 compared to yesterday's $1.1543.

Asia

Asian stocks turned in a mixed performance on Thursday as three days of trade negotiations between U.S. and Chinese officials ended in Beijing without a significant breakthrough. China said the meetings were "extensive, in-depth and detailed" without offering specifics.

China's Shanghai Composite Index dropped 9.25 points or 0.4 percent to 2,535.10 after the release of inflation data. On the other hand, Hong Kong's Hang Seng Index edged up 0.2 percent to 26,521.43.

Consumer prices in China were up just 1.9 percent year-over-year in December, the National Bureau of Statistics said. That was shy of expectations for an increase of 2.1 percent and down from 2.2 percent in November.

The bureau also said that producer prices were up an annual 0.9 percent, well shy of forecasts for 1.6 percent and down sharply from 2.7 percent in the previous month.

Japanese shares snapped a three-day winning streak as the yen firmed up due to the dovish tone of the Fed minutes released on Wednesday.

The Nikkei 225 Index tumbled 263.26 points or 1.3 percent to 20,163.80 after surging up 4.4 percent over the three previous sessions. The broader Topix closed 0.9 percent lower at 1,522.01.

Exporters Daikin Industries, TDK Corp and Sony dropped 2-3 percent, while heavyweights Fanuc, SoftBank and Kao Corp slumped 2-5 percent.

Factory automation machinery maker Yaskawa Electric, which has large exposure to China, plunged 3.4 percent.

Australian stocks saw modest strength as investors awaited more details on the U.S-China trade talks. The benchmark S&P/ASX 200 Index rose 17 points or 0.3 percent to 5,795.30 after climbing nearly 1 percent in the previous session. The broader All Ordinaries Index ended up 15.50 points or 0.3 percent at 5,853.90.

Oil Search rallied 1.5 percent and Woodside Petroleum and Santos rose around 0.7 percent each after oil prices jumped 5 percent on Wednesday. Map provider Nearmap soared 9.4 percent on upbeat first-half guidance.

Gold miner Newcrest Mining climbed 1.8 percent and Evolution Mining jumped 3.8 percent, riding on dollar's weakness after minutes from the Fed's Dec.18-19 meeting revealed that several policymakers were in favor of the U.S. central bank keeping rates steady this year.

Meanwhile, mining giant BHP lost 3.4 percent on going ex-dividend, while smaller rival Fortescue Metals Group declined 1.7 percent.

Shares of Costa Group Holdings slumped 38.8 percent after the horticultural company reported subdued demand for products such as tomatoes, avocado and berries.

South Korean stocks fell on profit taking as the U.S. and China wrapped up three days of trade talks without tangible results. The benchmark Kospi finished marginally lower at 2,063.28 after ending up nearly 2 percent in the previous session on hopes for a U.S.-China trade deal.

Europe

European stocks are moving lower on Thursday after three days of trade negotiations between U.S. and Chinese officials ended in Beijing without a significant breakthrough. Investors are also pondering Brexit risks and the Fed's future path of interest rate increases.

The U.K. Parliament agreed Wednesday that the government must come up with a new Brexit plan within three days if Prime Minister Theresa May's current proposal is voted down.

While the French CAC 40 Index has fallen by 0.5 percent, the German DAX Index and the U.K.'s FTSE 100 Index are down by 0.2 percent and 0.1 percent, respectively.

Royal Philips has dropped after it announced a realignment of its three reporting segments Diagnosis & Treatment, Connected Care & Health Informatics, and Personal Health.

Ericsson has also moved sharply lower after the mobile telecom equipment maker said it would book charges of 6.1 billion crowns ($687 million) for the fourth quarter.

Shares of Debenhams have also slumped after the retailer reported a sharp decrease in sales during the crucial Christmas trading period.

On the other hand, SA 1/4 dzucker has rallied in Frankfurt after confirming its full-year guidance. Marks & Spencer has also risen in London after backing its full-year guidance.

Premier Oil is also posting a standout gain. In its trading and operations update ahead of its 2018 results, the company said production was 7 percent ahead of last year at 80.5 kboepd.

In economic news, French industrial production declined in November, defying expectations for a modest increase, preliminary data from the statistical office INSEE showed.

Industrial production decreased a seasonally and working-day adjusted 1.3 percent, reversing a similar size increase in the previous month. Economists had expected production to remain unchanged.

U.S. Economic Reports

Adding to the positive picture of the labor market painted by last week's monthly jobs report, the Labor Department released a report showing a bigger than expected drop in first-time claims for U.S. unemployment benefits in the week ended January 5th.

The report said initial jobless claims fell to 216,000, a decrease of 17,000 from the previous week's revised level of 233,000.

Economists had expected jobless claims to dip to 225,000 from the 231.000 originally reported for the previous week.

St. Louis Federal Reserve President James Bullard is scheduled to give a presentation on U.S. economic and monetary policy at the Little Rock Chamber of Commerce's Power Up Little Rock event in Little Rock, Arkansas, at 12:40 pm ET.

Federal Reserve Chairman Jerome Powell is due to participate in a discussion at the Economic Club of Washington at 12:45 pm ET.

At 1 pm ET, the Treasury Department is due to announce the results of its auction of $16 billion worth of thirty-year bonds.

Chicago Fed President Charles Evans is also scheduled to deliver a speech and participate in a moderated Q&A session at the Milwaukee Business Journal Economic Forecast in Milwaukee, Wisconsin, at 1 pm ET.

At 1:20 pm ET, Minneapolis Fed President Neel Kashkari is due to speak about immigration and economic growth at the Jewish Community Relations Council Luncheon in Minneapolis, Minnesota.

Fed Vice Chairman Richard Clarida is scheduled to give a speech on the economic outlook and monetary policy at the Downtown Association in New York at 7 pm ET.

Stocks In Focus

Shares of L Brands (LB) are moving significantly lower in pre-market trading after the Victoria's Secret reported flat comparable sales for the five weeks ended January 5th, although the company also said it expects fourth quarter adjusted earnings towards the higher end of its previous guidance.

Department store chain Kohl's (KSS) is also likely to come under pressure after raising its full-year earnings guidance but reporting much slower holiday sales growth.

Shares of Target (TGT) are also seeing pre-market weakness even though the discount retailer reported strong holiday sales and reaffirmed its full-year earnings and sales forecast.

On the other hand, shares of Bed Bath & Beyond (BBBY) are moving sharply higher in pre-market trading after the home goods retailer reported better than expected fiscal third quarter earnings and provided upbeat guidance for fiscal 2019.

Homebuilder KB Home (KBH) is also likely to see initial strength after reporting fiscal fourth quarter earnings that exceeded analyst estimates on revenues that matched expectations.

Shares of Twitter (TWTR) may also move to the upside after Bank of America Merrill Lynch upgraded its rating on the social media giant to Buy.
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