US pre-open: Analysts debate scope for further gains, trade talks in focus

Wall Street is set for a higher open, with traders scanning the headlines swirling about the second round of trade talks between China and the US.

Significantly, overnight officials in Beijing questioned reports that its government had offered to slash the Asian giant's bilateral annual trade deficit with the States by $200bn.

However, in what was seen by some as an 'olive branch' to Washington, China did row back on its initial response to the US administration's threats of trade tariffs, announcing the end of its anti-dumping and anti-subsidy investigations into US exports of sorghum.

Against that backdrop, as of 1315 BST, futures for the Dow Jones Industrial were pointing towards a gain of 68.0 points at the open to 24,772.0, alongside a 3.50 point advance for the S&P 500 to 2,722.25.

Over in fixed income markets, the yield on the benchmark 10-year US Treasury was off by one basis point at 3.10%, but remained 13 basis points higher for the week.

In the background, there was a fair bit of 'chatter' out of strategists at some of Wall Street's largest investment banks around what they said were the fast-rising risks for the stockmarket.

Those at Bank of America-Merrill Lynch pointed out the reversal in fund flows out of financials seen over the preceding three weeks. That, they said, could be significant because in 2013 and 2017 such a reversal was seen before peaks in US Treasury yields.

"Rise in 10-year UST yields from 2% to 3% over the past 18 months a "good" rise in yields; if >3% a "bad" rise in yields this should be revealed in coming weeks by further outflows from financials, EM, credit as well as rising private client cash levels," they said in a research note sent to clients.

According to BofA-ML, their private clients's cash allocation fell to just 9.8% of assets under management over the latest week - a record low.

The investment bank's Bull & Bear timing indicator meanwhile was at 4.7 or 'neutral' territory.

To take note of, on Thursday the Russell 2000 index had notched up a record high.

Yet the S&P 500 was still on track for a slightly lower close for the week, albeit after clocking-in with significant gains over the prior five-day stretch.

No major economic releases were slated for Friday, although speeches from regional Fed presidents Loretta Mester and Robert Kaplan were scheduled.

On the company front, chip equipment maker Applied Materials was sharply lower after the company issued lower-than-expected guidance for earnings per share and sales in the next quarter.

Overnight, Applied Materials told analysts they could expect fiscal third quarter revenues to come in at between $4.33bn to $4.53bn, versus a consensus estimate of $4.53bn.

Shares in Deere&Co. on the other hand were a tad higher after the manufacturer of agricultural equipment, despite posting lower than forecast EPS and sales for its second fiscal quarter.

Stock in Campbell Soup was another big faller, after slashing its full-year guidance and announcing the exit of its chief executive officer.

AmTrust shares rocketed after activist Carl Icahn disclosed he had amassed 9.4% of the company's equity.