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Concerns About Global Economy May Weigh On Wall Street

The major U.S. index futures are pointing to a notably lower opening on Thursday, with stocks likely to extend the modest pullback seen in the previous session.

Concerns about the global economy may weigh on Wall Street after the European Commission lowered its eurozone growth forecast.

The European Commission slashed its GDP growth forecast for 2019 to 1.3 percent from 1.9 percent and lowered its estimate for growth in 2020 to 1.6 percent from 1.7 percent.

The downgrade reflected external factors, such as trade tensions and the slowdown in emerging markets, notably in China.

Officials warned that the European outlook faces substantial risks due to the uncertainty about Brexit and the slowdown in China.

A steep drop by shares of Twitter (TWTR) may also generate negative sentiment, as the social media giant reported better than expected fourth quarter results but forecast a jump in expenses this year.

Stocks turned in a relatively lackluster performance during trading on Wednesday before ending the session modestly lower. With the drop on the day, the major averages pulled back off their best closing levels in two months.

The major averages ended the day in negative territory but off their lows of the session. The Dow edged down 21.22 points or 0.1 percent to 25,390.30, the Nasdaq fell 26.80 points or 0.4 percent to 7,375.28 and the S&P 500 slipped 6.09 points or 0.2 percent to 2,731.61.

Profit taking may have contributed to the modest pullback on Wall Street, although selling pressure was subdued amid uncertainty about the near-term outlook for the markets.

Ambiguity about trade talks between the U.S. and China continued to hang over the markets, as President Donald Trump's State of the Union address last night lacked details on progress in the talks.

Treasury Secretary Steven Mnuchin called last week's meetings with Chinese Vice Premier Liu He "very productive" in an interview with CNBC's "Squawk Box," although traders may be looking for more concrete results.

In related news, the Commerce Department released a government shutdown-delayed report showing the U.S. trade deficit narrowed by much more than anticipated in the month of November.

The Commerce Department said the trade deficit narrowed to $49.3 billion in November from a revised $55.7 billion in October.

Economists had expected the deficit to narrow to $54.0 billion from the $55.5 billion originally reported for the previous month.

Andrew Hunter, Senior U.S. Economist at Capital Economics, said the data suggests that trade made a small positive contribution to GDP growth in the fourth quarter

"That boost is unlikely to last for long, however. Along with the appreciation of the dollar last year, the slowdown in global demand will continue to weigh on exports for the foreseeable future," Hunter said. "As a result, we expect trade to be a small drag on economic growth for most of this year."

Natural gas stocks moved significantly lower over the course of the trading session, dragging the NYSE Arca Natural Gas Index down by 1.9 percent.

The weakness in the sector came even though the price of natural gas for March delivery ended the day unchanged at $2.662 per million BTUs.

Considerable weakness also emerged among housing stocks, as reflected by the 1.3 percent drop by the Philadelphia Housing Sector Index.

Telecom and gold stocks also moved notably lower, while substantial strength remained visible among semiconductor stocks.

Reflecting the strength in the semiconductor sector, the Philadelphia Semiconductor Index soared 2.6 percent to a four-month closing high.

Shares of Skyworks Solutions (SWKS) moved sharply higher after the chipmaker reported weaker than expected fiscal first quarter results but announced a $2 billion stock repurchase program.

Microchip Technology (MCHP) also posted a standout gain after reporting fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

Commodity, Currency Markets

Crude oil futures are sliding $0.67 to $53.34 a barrel after rising $0.35 to $54.01 a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,311.80, down $2.60 compared to the previous session's close of $1,314.40. On Wednesday, gold fell $4.80.

On the currency front, the U.S. dollar is trading at 109.71 yen compared to the 109.97 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1335 compared to yesterday's $1.1362.

Asia

Asian stocks ended mixed on Thursday as investors shrugged off U.S. President Donald Trump's State of the Union address and looked for progress in the U.S.-China trade dispute ahead of crucial talks in Beijing next week.

Japanese shares fell despite SoftBank announcing a share buyback following the company's release of strong quarterly earnings.

The Nikkei 225 Index dropped 122.78 points or 0.6 percent to 20,751.28, while the broader Topix closed 0.8 percent lower at 1,569.03.

Automakers Honda Motor and Toyota fell 1-2 percent on concerns over global growth amid the U.S.-China trade war. Meanwhile, Mazda Motor jumped 6.4 percent on its upbeat full-year earnings.

Telecoms and investment firm SoftBank Group soared 17.7 percent after announcing a huge buyback of its shares. Tech stocks ended mixed, with Advantest falling 1.8 percent, while Tokyo Electron advanced 1.7 percent.

Australian markets rallied as a sliding Aussie dollar lifted commodity-related and healthcare stocks. Banks also rose on expectations of a low interest rate environment as RBA Governor Philip Lowe opened the door to a possible rate cut in the wake of growing economic risks.

The benchmark S&P/ASX 200 Index jumped 66.40 points or 1.1 percent to 6,092.50, while the All Ordinaries Index surged up 67.30 points or 1.1 percent to 6,159.10.

Rio Tinto gained 1.3 percent and smaller rival Fortescue Metals Group rose about 1 percent amid worries about a possible shortfall in iron ore supplies after Brazilian miner Vale declared force majeure earlier this week.

Energy stocks such as Woodside Petroleum, Santos, Origin Energy and Oil Search rose over 1 percent each after oil prices gained ground on Wednesday on signs of strong U.S. demand and tightening global crude supply.

The big four banks rose 1-2 percent, while healthcare companies CSL and Ramsay Health Care jumped around 2 percent, driven by a weaker Aussie dollar.

AMP rallied 2.5 percent after it replaced Paul Sainsbury, the head of its wealth management unit, just days after the release of the royal commission's final report.

On the other hand, AGL Energy plunged 4.8 percent after it announced a A$25 million upgrade to Victoria's Loy Yang coal-fired power station.

In economic news, the latest survey from the Australian Industry Group revealed that the construction sector in Australia continued to contract in January, albeit at a slower pace.

Seoul stocks ended on a flat note amid increasing uncertainties at the global level. The benchmark Kospi finished marginally lower at 2,203.42 as investors awaited progress in the U.S.-China trade talks and the scheduled summit meeting between the U.S. and North Korea.

Europe

European stocks have moved mostly lower on Thursday following the lower growth forecasts from the European Commission as well as the Bank of England.

Despite the lower forecasts, the BoE said an ongoing tightening of monetary policy over the forecast period, at a gradual pace and to a limited extent, would still be appropriate.

While the German DAX Index has plunged by 1.9 percent, the French CAC 40 Index is down by 1.1 percent and the U.K.'s FTSE 100 Index is down by 0.4 percent.

Steelmaker ArcelorMittal has moved sharply lower on the day after its fourth quarter earnings missed analyst estimates.

Siemens also moved to the downside in Frankfurt after the European Commission blocked its takeover of Alstom's rail transport business.

On the other hand, Sweden's ICA Gruppen has shown a strong move to the upside after saying it closed 2018 with "good momentum."

British foodservice management firm Compass Group has also rallied after lifting its full-year growth expectations.

Travel company Thomas Cook has also soared after saying it is conducting a "strategic review" of its airline.

In economic news, Germany industrial production decreased for a fourth consecutive month in December, defying expectations for an increase, preliminary figures from the Federal Statistical Office showed.

Industrial production fell a calendar and seasonally adjusted 0.4 percent from November, when it decreased 1.3 percent, revised from 1.9 percent. Economists had expected a 0.8 percent increase.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits pulled back in the week ended February 2nd after the jump seen in the previous week, according to a report released by the Labor Department.

The report said initial jobless claims fell to 234,000, a decrease of 19,000 from the previous week's unrevised level of 253,000. Economists had expected jobless claims to drop to 221,000.

At 9:15 am ET, Dallas Federal Reserve President Robert Kaplan is scheduled to participate in a moderated Q&A at the University of Texas at Austin McCombs School of Business Outlook Series in Dallas, Texas.

Fed Vice Chairman Richard Clarida is due to present a research paper titled "The Global Factor in Neutral Policy Rates" at a Czech National Bank and Czech Economic Society academic seminar in Prague at 9:30 am ET.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $19 billion worth of thirty-year bonds.

The Fed is due to release its report on consumer credit in the month of December. Consumer credit is expected to increase by $17.0 billion.

At 7:30 pm ET, St. Louis Fed President James Bullard is scheduled to deliver a presentation on the U.S. economy and monetary policy at St. Cloud State University in St. Cloud, Minnesota.

Stocks In Focus

Shares of Tapestry (TPR) are moving sharply lower in pre-market trading after the maker of high-end shoes and handbags reported fiscal second quarter results that missed analyst estimates on both the top and bottom lines.

Smart speaker manufacturer Sonos (SONO) may also come under pressure after revealing its CFO Michael Giannetto plans to retire, which has overshadowed the company's better than expected fiscal first quarter earnings.

Shares of Biogen (BIIB) may also see initial weakness after the U.S. Patent Office said Mylan (MYL) could succeed in a patent challenge to the biotechnology company's multiple sclerosis drug.

On the other hand, shares of Chipotle Mexican Grill are seeing significant pre-market strength after the restaurant chain reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

SunTrust Banks (STI) is also likely to move to the upside after announcing an agreement to combine with BB&T Corp. (BBT) in an all-stock merger of equals valued at approximately $66 billion.

Shares of Cardinal Health (CAH) may also see initial strength after the prescription drug distributor reported better than expected fiscal second quarter results.

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