Stocks headed for strong open on trade talk optimism

The two-day mid-level round of trade talks between the US and China were extended by a day into Wednesday. Talks have concluded, and a statement is expected to show optimism and that discussions will continue. President Trump appears to be motivated to conclude this trade war to help the pummeled stock market. US stocks are poised to open higher, following the rally seen in Europe. Emerging-market stocks extended gains that’s taken MSCI’s gauge to the highest in more than a month.  The US dollar is also modestly softer against the majors.

Later this afternoon, we will see the release of the FOMC minutes from the December 19th meeting. The FOMC minutes will likely highlight the downside risks to the economy and the rational for downgrading the dot plot forecast from three hikes down to two for 2019. The minutes for the December 19th meeting however may not carry much weight following Fed Chair Powell’s dovish spin on January 4th. Powell soothed markets by noting the Fed will be patient and flexible with monetary policy tightening. He also clarified that quantitative tightening won’t remain on autopilot, a clear blunder he made at the December presser.

The S&P 500 index could face key resistance from the 2625 level.

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