Wall St. on track to open lower after recent surge

Business

(Reuters) – Wall Street was set to open lower on Friday after rallying for the past five sessions on hopes of a resolution in the U.S.-China trade dispute and assurances from the Federal Reserve that it would be patient on interest rate hikes.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 10, 2019. REUTERS/Brendan McDermid

A steady start to 2019 has lifted the S&P 500 .SPX by over 10 percent from a 20-month low it touched around Christmas on hopes of a trade deal, strong data on U.S. jobs growth and dovish views from the Fed.

Futures pointed to a slight opening loss for the main indexes, putting at risk the S&P 500’s five-day winning streak, its longest since September. The Nasdaq Composite index .IXIC closed at a level on Thursday that was only a couple of points below its 50-day moving average, a closely watched level of support.

U.S. officials expect China’s top trade negotiator may visit Washington this month, signaling that higher-level discussions are likely to follow this week’s talks with mid-level officials in Beijing.

“We’ve run up and people seem to be in a wait-and-watch mode before they put more money back in,” said Mark Grant, chief global strategist at B. Riley FBR Inc.

With big U.S. banks kicking off fourth-quarter earnings next week, investors will comb through earnings reports and projections for signs of a slowdown in economic growth, concerns about which drove a selloff in stocks in the final quarter of 2018.

S&P 500 companies on average are seen posting 14.5 percent growth in earnings per share as they report December-quarter results, according to IBES data from Refinitiv. However, expectations for growth in 2019 are at 6.4 percent, down from an expectation of 7.3 percent on Jan. 1.

At 8:45 a.m. ET, Dow e-minis 1YMc1 were down 71 points, or 0.3 percent. S&P 500 e-minis ESc1 were down 9.25 points, or 0.36 percent and Nasdaq 100 e-minis NQc1 were down 30 points, or 0.45 percent.

Stocks got a small boost on Thursday after Fed chair Jerome Powell reiterated that the U.S. central bank can be patient in approving any further rate increases as officials gauge whether the U.S. economy will slow this year, as some in financial markets worry.

Data showed U.S. consumer prices fell for the first time in nine months in December amid a plunge in gasoline prices, but underlying inflation pressures remained firm as rental housing and healthcare costs rose steadily.

Among stocks, Starbucks Corp (SBUX.O) fell 2.8 percent after Goldman Sachs downgraded the stock to “neutral”, citing concerns about China. Goldman also cut its rating on Yum Brands Inc (YUM.N) to “sell”, pointing to peak valuation, and its shares slipped 2.5 percent.

Activision Blizzard Inc (ATVI.O) declined 9.1 percent after the video game publisher transferred full publishing rights for its “Destiny” game franchise to video game developer Bungie.

Netflix Inc’s (NFLX.O) shares, which have leapt more than 20 percent this year, were up 1.9 percent, with Credit Suisse raising quarterly subscriber additions estimates ahead of its earnings next week.

Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta

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