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Stocks May Extend Yesterday's Rally In Early Trading - U.S. Commentary


Stocks are likely to move to the upside in early trading on Wednesday, adding to the strong gains posted in the previous session. The major index futures are currently pointing to a higher open for the markets, with the Dow futures up by 80 points.

Optimism about avoiding another government shutdown may generate continued buying interest on Wall Street, as President Donald Trump said he was "not happy" with a tentative deal reached by lawmakers but did not specifically reject the proposal.

The agreement includes far less money for physical barriers on the border than Trump has demanded, although political observers have suggested the president will likely want to avoid another damaging shutdown.

Trump has argued Democrats will be to blame for another shutdown, although the public may disagree as his controversial border wall remains the key sticking point in negotiations.

The markets may also benefit from continued optimism about U.S.-China trade talks after Trump indicated he is willing to delay raising tariffs on Chinese goods if the two sides are close to a deal.

A report from the South China Morning Post said Chinese President Xi Jinping is scheduled to meet U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin during this week's talks in Beijing.

The meeting with Xi as well as a banquet for the U.S. delegation would be a sign of goodwill to cement a trade deal between the world's two biggest economies, the SCMP said.

On the U.S. economic front, the Labor Department released a report showing consumer prices were unchanged for the third straight month in January.

The Labor Department said its consumer price index was unchanged in January, matching the revised reading for December. Economists had expected consumer prices to inch up by 0.1 percent.

Excluding food and energy prices, core consumer prices rose by 0.2 percent for the fifth consecutive month. The uptick in core prices matched economist estimates.

Following the lackluster performance seen on Monday, stocks moved sharply higher over the course of the trading day on Tuesday. With the strong upward move, the major averages reached their best closing levels in over two months.

The major averages finished the day firmly in positive territory. The Dow soared 372.65 points or 1.5 percent to 25,425.76, the Nasdaq jumped 106.71 points or 1.5 percent to 7,414.62 and the S&P 500 surged up 34.93 points or 1.3 percent to 2,744.73.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index shot up by 1.3 percent, while China's Shanghai Composite Index spiked by 1.8 percent.

The major European markets have also moved to the upside on the day. While the U.K.'s FTSE 100 Index has advanced by 0.6 percent, the French CAC 40 Index and the German DAX Index are both up by 0.4 percent.

In commodities trading, crude oil futures are rising $0.35 to $53.45 a barrel after climbing $0.69 to $53.10 a barrel on Tuesday. Meanwhile, after edging up $2.10 to $1,314 an ounce in the previous session, gold futures are slipping $0.10 to $1,313.90 an ounce.

On the currency front, the U.S. dollar is trading at 110.83 yen compared to the 110.48 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1299 compared to yesterday's $1.1326.

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