By Investors Hub
The major U.S. index futures are pointing to a higher opening on Wednesday following the sharp pullback seen late in the previous session.
Renewed optimism about upcoming U.S.-China trade talks may generate initial buying interest after a report from Bloomberg News said China is still open to reaching a partial trade deal with the U.S.
An official with direct knowledge of the talks told Bloomberg that negotiators aren?t optimistic about securing a broad agreement to end the U.S.-China war but said China would accept a limited deal as long as President Donald Trump does not impose any more tariffs.
In return, the official told Bloomberg, Beijing would offer non-core concessions like purchases of agricultural products without giving in on major sticking points.
The positive reaction to the report reflects the intense focus on the next round of high-level trade talks set to begin on Thursday.
Nonetheless, overall trading activity may be somewhat subdued as traders look ahead to the release of the minutes of the Federal Reserve?s latest monetary policy meeting.
The minutes may shed additional light on the Fed?s decision to cut interest by 25 basis points in September and provide clues about the outlook for future rate cuts.
After coming under pressure early in the session, stocks regained some ground over the course of the trading day on Tuesday before pulling back sharply going into the close. The major averages ended the day firmly in negative territory.
The Nasdaq and the S&P 500 fell to new lows in late-day trading, while the Dow remained off its worst levels. The Dow still slumped 313.98 points or 1.2 percent to 26,164.04, the Nasdaq plunged 132.52 points or 1.7 percent to 7,823.78 and the S&P 500 tumbled 45.73 points or 1.6 percent to 2,893.06.
Selling pressure re-emerged late in the session following news the Trump administration imposed visa restrictions on Chinese officials over abuses of Muslim minorities in the Xinjiang region.
The new visa restrictions come just two days before the U.S. and China are scheduled to resume high-level trade talks in Washington.
Optimism about the trade talks had already waned after a report from the South China Morning Post said China is subtly toning down expectations ahead of this week’s high-level negotiations.
The SCMP said Chinese Vice Premier Liu He is leading China’s delegation to Washington but will not carry the title of “special envoy” for President Xi Jinping, an early indication that Liu has not been given any particular instructions from China’s leader.
A source briefed on preparations for the trade talks also told the SCMP that the Chinese delegation may cut short their stay in Washington.
News the U.S. has expanded its trade blacklist to include some of China’s top artificial intelligence firms has also cast a shadow over the talks along with a Bloomberg report the White House is discussing blocking government pension funds from investing in China.
Meanwhile, traders largely shrugged off a Labor Department report showing an unexpected decrease in U.S. producer prices in the month of September.
The Labor Department said its producer price index for final demand fell by 0.3 percent in September after inching up by 0.1 percent in August. The drop surprised economists, who had expected another 0.1 percent uptick.
Excluding food and energy prices, core producer prices also slid by 0.3 percent in September after climbing by 0.3 percent in August. Economists had expected core prices to rise by 0.2 percent.
The tame inflation data may clear the way for the Federal Reserve to continue cutting interest rates amid signs of slowing economic growth.
In remarks at the National Association for Business Economics annual meeting in Denver, Colorado, Fed Chairman Jerome Powell reiterated his pledge to “act as appropriate” to support continued growth, a strong job market, and inflation moving back to the Fed’s symmetric 2 percent objective.
Powell also indicated that the central bank intends to resume increasing the size of its balance sheet following recent, unexpectedly intense volatility in wholesale funding markets.
Semiconductor stocks showed a substantial move to the downside on the day, dragging the Philadelphia Semiconductor Index down by 3.1 percent to its lowest closing level in over a month.
Chipmaker Ambarella (AMBA) posted a particularly steep loss after one of its Chinese customers was blacklisted by the U.S. government.
Significant weakness was also visible among natural gas stocks, as reflected by the 3 percent nosedive by the NYSE Arca Natural Gas Index. The index ended the session at a nearly fifteen-year closing low.
Biotechnology, computer hardware, and banking stocks also saw considerable weakness on the day, reflecting broad based selling pressure on Wall Street.
Meanwhile, gold stocks were among the few groups to buck the downtrend, with the NYSE Arca Gold Bugs Index surging up by 3 percent.
The rally by gold stocks came as the price of the precious metal moved to the upside in electronic trading after ending the regular session slightly lower.
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