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Trump-Kim Summit In Focus On Wall Street

The major U.S. index futures are pointing to a lower opening on Wednesday, with stocks likely to add to the modest losses posted in the previous session.

Uncertainty may lead to some initial weakness on Wall Street, although selling pressure is likely to be subdued as traders keep an eye on President Donald Trump‘s second summit with North Korean leader Kim Jong Un.

Traders may look to the Trump-Kim meeting for more concrete signs of progress toward the denuclearization of the Korean peninsula.

“Kim Jong Un and I will try very hard to work something out on Denuclearization & then making North Korea an Economic Powerhouse,” Trump said on Twitter this morning. “I believe that China, Russia, Japan & South Korea will be very helpful!”

Stocks showed a lack of direction over the course of the trading session on Tuesday after recovering from an initial move to the downside. The major averages spent much of the day bouncing back and forth across the unchanged line.

Eventually, the major averages finished the session slightly lower. The Dow slipped 33.97 points or 0.1 percent to 26,057.98, the Nasdaq edged down 5.16 points or 0.1 percent to 7,549.30 and the S&P 500 dipped 2.21 points or 0.1 percent to 2,793.90.

The choppy trading on Wall Street came as Federal Reserve Chairman Jerome Powell delivered his semiannual monetary policy report to Congress, telling lawmakers the U.S. economy remains healthy but warning about potential headwinds.

Powell noted in prepared remarks before the Senate Banking Committee that the Fed has seen “some crosscurrents and conflicting signals” regarding current conditions and the economic outlook over the past few months.

The Fed Chief specifically pointed to volatility in the financial markets toward the end of 2018, calling financial conditions “less supportive of growth than they were earlier last year.”

Powell also cited slowing economic growth in foreign countries, particularly China and Europe, as well was uncertainty about Brexit and ongoing trade talks between the U.S. and China.

“We will carefully monitor these issues as they evolve,” Powell told the members of the Republican-controlled Senate committee.

Reflecting the uncertainty, Powell highlighted the Fed’s decision at its January meeting to adopt a “patient approach” with regard to future interest rate hikes.

“Going forward, our policy decisions will continue to be data dependent and will take into account new information as economic conditions and the outlook evolve,” he said.

Lingering uncertainty about trade talks between the U.S. and China kept some traders on the sidelines even after President Donald Trump decided to postpone an increase in tariffs on Chinese goods.

Trump and other officials have cited progress at recent meetings, although the chances the talks will result in a long-term trade agreement between the world’s two largest economies remain unclear.

Questions about the impending summit between Trump and North Korean dictator Kim Jong Un added to the trepidation on Wall Street.

On the U.S. economic front, a Commerce Department showing housing starts tumbled to their lowest level in over two years in December was offset by a Conference Board report showing a bigger than expected rebound in consumer confidence in February.

Most of the major sectors ended the day showing only modest moves, although energy stocks showed a notable move to the downside over the course of the session.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index slid by 1.3 percent and 1.2 percent, respectively.

The weakness among energy stocks came even though the price of crude oil for April delivery inched up $0.02 to $55.50 a barrel.

Commodity, Currency Markets

Crude oil futures are jumping $1.17 to $56.67 a barrel after inching up $0.02 to $55.50 a barrel on Tuesday. Meanwhile, after slipping $1 to $1,328.50 an ounce in the previous session, gold futures are edging down $0.80 to $1,327.70 an ounce.

On the currency front, the U.S. dollar is trading at 110.70 yen compared to the 110.59 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1389 compared to yesterday’s $1.1389.

Asia

Asian stocks closed mostly higher on Wednesday as investors welcomed dovish comments on monetary policy from Fed Chairman Powell and eagerly looked forward to the second summit between U.S. President Donald Trump and North Korean leader Kim Jong Un in Vietnam.

Chinese shares ended higher after Powell reiterated the U.S. central bank would stay patient on monetary policy in the face of economic headwinds.

The benchmark Shanghai Composite Index rose 12.31 points or 0.4 percent to 2,953.82, although Hong Kong’s Hang Seng Index ended edged down 14.62 points or 0.1 percent to 28,757.44.

Japanese shares ended higher as gains in the defensive sector offset profit taking in China-related stocks. The Nikkei 225 Index climbed 107.12 points or 0.5 percent to 21,556.51, while the broader Topix closed 0.2 percent higher at 1,620.42.

Pharma and realty stocks gained ground, with Takeda Pharmaceutical, Daiichi Sankyo and Mitsui Fudosan rising 2-4 percent. Komatsu, Keyence Corp. and Yaskawa Electric dropped 1-2 percent.

Australian markets eked out modest gains as higher commodity prices on the back of a weaker U.S. dollar supported mining stocks. The benchmark S&P/ASX 200 Index rose 21.90 points or 0.4 percent to 6,150.30, while the broader All Ordinaries Index ended up 24.60 points or 0.40 percent at 6,233.60.

Mining giant Rio Tinto rose 0.6 percent ahead of its full-year earnings announcement, while BHP added 0.4 percent.

Woodside Petroleum, Beach Energy and Santos gained over 1 percent as oil prices bounced back on news that OPEC plans to continue production cuts despite comments from Trump.

The big four banks rose between half a percent and 0.9 percent. Bubs Australia soared 4.4 percent after it announced a long-term supply agreement with Bega Cheese subsidiary Tatura.

On the economic front, official data showed that the value of construction work completed in Australia fell a seasonally adjusted 3.1 percent sequentially in the fourth quarter of 2018, missing forecasts for an increase of 0.5 percent.

Seoul stocks closed modestly higher as investors eagerly awaited the outcome of the summit between Trump and Kim. The benchmark Kospi gained 8.19 points or 0.4 percent to finish at 2,234.79.

Carmakers led the surge as Hyundai Motor Group rejected demands by U.S. activist investor Elliott Management for a combined 7 trillion won ($6.3 billion) dividend payout.

Hyundai Motor shares rallied 5.3 percent, its affiliate Kia Motors advanced 1.5 percent and auto parts maker Hyundai Mobis added 3.8 percent. On the flip side, steelmaker Posco fell 2.7 percent.

Europe

European stocks have retreated on Wednesday after Fed Chairman Powell warned of potential slower growth and mounting U.S. debt.

Rising geopolitical tensions between India and Pakistan as well as caution ahead of a crucial meeting between U.S. President Donald Trump and North Korean leader Kim Jong Un in the Vietnamese capital have also kept investors nervous.

While the U.K.’s FTSE 100 Index has slid by 0.8 percent, the German DAX Index is down by 0.4 percent and the French CAC 40 Index is down by 0.2 percent.

Spain’s Banco Santander has moved notably lower amid signs the bank is facing pressure over its capital levels.

Dutch supermarkets and eCommerce company Ahold Delhaize has also fallen after its fourth quarter net income declined 30.5 percent.

Marks & Spencer is posting a steep loss in London as it unveiled plans to launch a rights issue to fund an online food joint venture with Ocado.

Metro Bank has also plunged as a major accounting error at the lender triggered a hefty investor cash call. Fashion retailer Ted Baker has also tumbled after a profit warning.

On the other hand, German chemicals and pharmaceutical group Bayer has rallied after its adjusted core earnings rose 15.8 percent in the fourth quarter.

U.S. Economic Reports

At 10 am ET, Fed Chairman Jerome Powell is scheduled to begin his testimony before the House Financial Services Committee.

The National Association of Realtor is also due to release its report on pending home sales in the month of January at 10 am ET. Pending home sales are expected to rise by 0.4 percent in January after tumbling by 2.2 percent in December.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Also at 10 am ET, the Commerce Department is scheduled to release government shutdown-delayed data on factory orders in December. Factory orders are expected to climb by 0.5 percent.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended February 22nd at 10:30 am ET.

Crude oil inventories are expected to increase by 3.6 million barrels after climbing by 3.7 million barrels in the previous week.

Stocks In Focus

Shares of Weight Watchers (WTW) are moving sharply lower in pre-market trading after the weight loss company reported weaker than expected fourth quarter results and provided disappointing guidance.

Generic drug maker Mylan (MYL) may also come under pressure after reporting fourth quarter earnings that missed expectations and forecasting full-year earnings below estimates.

Shares of EOG Resources (EOG) are also seeing notably pre-market weakness after the energy company reported weaker than expected fourth quarter earnings.

On the other hand, shares of Best Buy (BBY) are moving significantly higher in pre-market trading after the consumer electronics retailer reported fourth quarter results that beat estimates on both the top and bottom lines.

Home improvement retailer Lowe’s (LOW) may also see initial strength after reporting better than expected fourth quarter earnings, although its sales for the quarter missed analyst estimates.

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