Stock futures steady on trade optimism

[January 08, 2019]   By Sruthi Shankar

(Reuters) - U.S. stock index futures pointed to a third consecutive day of gains for Wall Street on Tuesday, lifted by expectations that the United States and China would strike a deal to end their months-long trade war that has battered financial markets.

S&P 500 e-minis <ESc1> were up 0.68 percent, set to add to a four 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 talks in Beijing extended into Tuesday evening, a source with knowledge of the meetings told Reuters, after U.S. Commerce Secretary Wilbur Ross said on Monday that Beijing and Washington could reach a trade deal that "we can live with".

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

Trade and growth concerns 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 growth 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 take a toll on 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.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 7, 2019. REUTERS/Brendan McDermid

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

At 7:32 a.m. ET, Dow e-minis <1YMc1> were up 178 points, or 0.76 percent and Nasdaq 100 e-minis <NQc1> were up 49 points, or 0.75 percent.
 

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

Goldman Sachs said in a client note that it expects 2019 to be a challenging year for semiconductors, particularly in the first half.

PG&E Corp <PCG.N> shares dipped 1.3 percent in premarket trading 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.

United States Steel Corp <X.N> dropped 0.5 percent after Credit Suisse downgraded to 'neutral'.

(Reporting by Sruthi Shankar in Bengaluru)

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