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Upward Momentum Persists After Trade Deal Signing

The major U.S. index futures are pointing to a higher opening on Thursday, with stocks poised to add to the modest gains posted in the previous session.

The markets may continue to benefit from recent upward momentum following the official signing of the U.S.-China phase one trade deal on Wednesday.

The deal did not address some major issues and leaves significant tariffs in place, but the agreement has still helped lift some of the uncertainty generated by the trade war between the two economic superpowers.

Buying interest may also be generated in reaction to some upbeat U.S. economic news, including a report from the Labor Department showing an unexpected decrease in initial jobless claims in the week ended January 11th.

The Commerce Department also released a report showing U.S. retail sales rose in line with economist estimates in the month of December, with a sharp pullback in auto sales more than offset by strength in other areas.

Stocks climbed to new record intraday highs in morning trading on Wednesday but gave back some ground over the course of the session. The major averages pulled back well off their best levels, although the Dow and the S&P 500 still ended the session at new record closing highs.

The Dow climbed 90.55 points or 0.3 percent to 29,030.22 and the S&P 500 rose 6.14 points or 0.2 percent to 3,289.29, while the Nasdaq pulled back near the unchanged line before closing up 7.37 points or 0.1 percent at 9,258.70.

The early strength on Wall Street came as traders awaited the signing of the phase one trade deal between the U.S. and China.

However, stocks pulled back after President Donald Trump and Chinese Vice Premier Liu He, Beijing's chief trade negotiator, officially signed the agreement in a ceremony at the White House.

In lengthy and sometimes rambling remarks ahead of the signing, Trump said the U.S. and China are "righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families."

"It doesn't get any bigger than this," added Trump, who launched his trade war back in March of 2018 to address what he has described as the U.S. being taken advantage of by China.

Trump said the deal calls for China to purchase $200 billion worth of U.S. goods over the next two years, including up to $50 billion worth of agricultural products.

The deal also purportedly addresses issues such as intellectual property theft, forced technology transfers and currency manipulation by China.

In exchange, the U.S. will scrap a new round of tariffs and cut tariffs on approximately $120 billion worth of Chinese goods in half to 7.5 percent.

Trump noted a 25 percent tariff on $250 billion worth of Chinese imports will remain in place in order to give the U.S. leverage as the two countries enter into phase two negotiations.

On the U.S. economic front, a report released by the Labor Department showed a modest increase in U.S. producer prices in the month of December.

The Labor Department said its producer price index for final demand inched up by 0.1 percent in December after coming in unchanged in November. Economists had expected prices to rise by 0.2 percent.

Excluding food and energy prices, core producer prices still crept up by 0.1 percent in December after dipping by 0.2 percent in November. Core prices were also expected to increase by 0.2 percent.

Meanwhile, the Federal Reserve's Beige Book said U.S. economic activity generally continued to expand modestly in the final six weeks of 2019.

Gold stocks moved sharply higher over the course of the trading session, driving the NYSE Arca Gold Bugs Index up by 2.2 percent. The rally by gold stocks came amid a notable increase by the price of the precious metal.

Interest rate-sensitive utilities stocks also turned in a strong performance, as reflected by the 1.6 percent advance by the Dow Jones Utility Average. The average ended the session at a new record closing high.

On the other hand, oil service stocks came under pressure on the day, dragging the Philadelphia Oil Service Index down by 1.8 percent. A decrease by the price of crude oil weighed on oil service stocks.

Significant weakness was also visible among banking stocks, with the KBW Bank Index slumping by 1.7 percent to its lowest closing level in over a month.

Bank of America (BAC) posted a notable loss despite reporting fourth quarter results that beat analyst estimates on both the top and bottom lines.

Commodity, Currency Markets

Crude oil futures are inching up $0.14 to $57.95 a barrel after sliding $0.42 to $57.81 a barrel on Wednesday. Meanwhile, after climbing $9.40 to $1,554 an ounce in the previous session, gold futures are slipping $1.20 to $1,552.80 an ounce.

On the currency front, the U.S. dollar is trading at 109.99 yen compared to the 109.90 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1154 compared to yesterday's $1.1150.

Asia

Asian stocks rose broadly on Thursday, though overall gains remained limited as market reaction appeared muted to the signing of a partial trade deal between the United States and China.

Chinese stocks slipped and the yuan held steady as the U.S.-China trade deal left numerous thorny issues unresolved.

The benchmark Shanghai Composite Index dropped 15.96 points, or 0.5 percent, to 3,074.08, while Hong Kong's Hang Seng Index rose 109.45 points, or 0.4 percent, to 28,883.04.

Japanese shares ended marginally higher after the release of upbeat core machinery orders data. The Nikkei 225 Index edged up 16.55 points, 0.1 percent, to close at 23,933.13, while the broader Topix closed 0.1 percent lower at 1,728.72.

Core machine orders in Japan jumped a seasonally adjusted 18.0 percent sequentially in November, the Cabinet Office said, coming in at 942.7 billion yen. That blew past expectations for an increase of 2.9 percent following the 6.0 percent slide in October.

On a yearly basis, core machine orders climbed 5.3 percent - again exceeding expectations for a decline of 5.3 percent following the 6.1 percent drop in the previous month.

Uniqlo-operator Fast Retailing rose 1.4 percent, while mobile carrier SoftBank Group declined 2.2 percent.

Sports shoe maker Asics rallied 2.5 percent amid reports Nike's acclaimed running shoes may be banned from competition by World Athletics.

Australian markets hit fresh record highs as the U.S. and China signed a long-awaited preliminary trade deal. The benchmark S&P/ASX 200 Index climbed 47.00 points, or 0.7 percent, to 7,041.80, while the broader All Ordinaries Index ended up 45.10 points, or 0.6 percent, to 7,158.60.

The big four banks rose between 0.7 percent and 1 percent. Oil & gas explorer Woodside Petroleum gained 0.6 percent after it posted a nearly 7 percent increase in fourth quarter production and forecast higher output for fiscal 2020.

Gold miner Newcrest Mining rose over 1 percent and Northern Star Resources added 0.3 percent, benefiting from firm bullion prices.

Healthcare stocks such as CSL and Cochlear rose over 1 percent, while energy stocks closed on a mixed note.

Seoul stocks ended higher, led by technology companies and automakers. The benchmark Kospi climbed 17.07 points, or 0.8 percent, to 2,248.05.

Samsung Electronics jumped 2.9 percent and SK Hynix added 1 percent. Hyundai Motor rallied 3 percent after saying it aims to sell 10,100 units of the hydrogen-powered sport utility vehicle Nexo in Korea this year.

Europe

European stocks have moved to the downside in cautious trading on Thursday as trade war worries ease and focus shifts to the corporate earnings season.

While the U.K.'s FTSE 100 Index has fallen by 0.4 percent, the German DAX Index is down by 0.1 percent and the French CAC 40 Index is just below the unchanged line.

British recruiter Hays has shown a significant move to the downside after warning that first-half profits will fall around 19 percent.

Pearson has also plunged as the publication and education company expects profits to fall next year amid another drop in demand for U.S. college textbooks.

Restaurant company Whitbread has also slumped after saying it would continue to be hit by economic uncertainty and higher costs in the U.K.

On the other hand, meal-kit delivery company HelloFresh has soared after its preliminary 2019 results topped forecasts.

Associated British Foods has also jumped after its Group revenue from continuing operations for the 16 weeks ended January 4, 2020 rose 4 percent from last year.

Shares of Rank Group have also surged. The casinos and gaming company said it now expects fiscal 2020 underlying operating profit pre-IFRS16 to be above current market expectations.

In economic news, Germany's consumer price index rose 1.5 percent year-on-year in December, following a 1.1 percent increase in November, final data from the Federal Statistical Office showed. This was in line with initial estimate.

European passenger car demand increased for the fourth straight month to log the highest December total on record, data from the European Automobile Manufacturers' Association revealed today.

Passenger car sales surged 21.7 percent year-on-year, but this was partially due to low base effect, as registrations decreased 8.4 percent in December 2018. The agency said specific market changes also contributed to the exceptional growth in December.

U.S. Economic Reports

A report released by the Labor Department on Thursday showed first-time claims for U.S. unemployment benefits unexpectedly decreased in the week ended January 11th.

The report said initial jobless claims fell to 204,000, a decrease of 10,000 from the previous week's unrevised level of 214,000. The drop came as a surprise to economists, who had expected jobless claims to inch up to 216,000.

The Labor Department said the less volatile four-week moving average also slid to 216,250, a decrease of 7,750 from the previous week's unrevised average of 224,000.

The Commerce Department also released a report showing U.S. retail sales rose in line with economist estimates in the month of December, with a sharp pullback in auto sales more than offset by strength in other areas.

The report said retail sales climbed by 0.3 percent in December, matching the upwardly revised increase in November.

Economists had expected retail sales to rise by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month.

Excluding auto sales, retail sales increased by 0.7 percent in December after coming in unchanged in November. Ex-auto sales had been expected to climb by 0.5 percent.

Additionally, the Philadelphia Federal Reserve released a report showing a substantial acceleration in the pace of growth in regional manufacturing activity in the month of January.

The Philly Fed said its diffusion index for current general activity surged up to 17.0 in January from an upwardly revised 2.4 in December. A positive reading indicates growth in regional manufacturing activity.

Economists had expected the diffusion index for current general activity to climb to 3.9 from the 0.3 originally reported for the previous month.

Import prices in the U.S. increased in line with economist estimates in the month of December, the Labor Department revealed in a separate report.

The report said import prices climbed by 0.3 percent in December after inching up by a revised 0.1 percent in November.

Economists had expected import prices to rise by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month.

Meanwhile, the Labor Department said export prices dipped by 0.2 percent in December after rising by 0.2 percent in November. Export prices had been expected to show another 0.2 percent increase.

At 10 am ET, the National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of January. The housing market index is expected to dip to 75 in January after jumping to 76 in December.

The Commerce Department is also due to release its report on business inventories in the month of November at 10 am ET. Business inventories are expected to edge down by 0.1 percent.

Federal Reserve Governor Michelle Bowman is also slated to speak on the outlook for housing at the Home Builder's Association of Greater Kansas: 2020 Economic Forecast Breakfast in Kansas City, Missouri, at 10 am ET.

Stocks In Focus

Shares of XPO Logistics (XPO) are spiking in pre-market trading after the logistics provider announced its board of directors has authorized a review of strategic alternatives, including the possible sale or spin-off of one or more of the company's business units.

Investment bank Morgan Stanley (MS) may also see initial strength after reporting fourth quarter earnings that exceeded expectations on revenues that came in well above estimates.

On the other hand, shares of PPG Industries (PPG) may come under pressure after the paint maker reported fourth quarter results that missed analyst estimates on both the top and bottom lines.

Aluminum producer Alcoa (AA) could also see early weakness after reporting a wider than expected fourth quarter loss on revenues that came in below expectations.

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