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Profit Taking May Lead To Pullback On Wall Street - U.S. Commentary


Following the rally seen in the previous session, stocks may give back some ground in early trading on Tuesday. The major index futures are currently pointing to a lower open for the markets, with the Dow futures down by 99 points.

Profit taking may contribute to initial weakness on Wall Street, as traders cash in on the strong gains posted on Monday in reaction to the trade war truce reached by President Donald Trump and Chinese President Xi Jinping.

Uncertainty about whether the 90-day truce will give the U.S. and China enough time to reach a long-term trade agreement may inspire traders to cash in on yesterday's strong upward move.

News that U.S. Trade Representative Robert Lighthizer, one of Trump's more hawkish advisors on trade with China, has been tapped to lead the negotiations has added to the skepticism.

Trump has appeared optimistic about the potential for an agreement, claiming U.S. relations with China have taken a "big lead forward" as a result of his meeting with XI.

"Very good things will happen," Trump said in a post on Twitter. "We are dealing from great strength, but China likewise has much to gain if and when a deal is completed. Level the field!"

"President Xi and I have a very strong and personal relationship," he added. "He and I are the only two people that can bring about massive and very positive change, on trade and far beyond, between our two great Nations."

Overall trading activity may be somewhat subdued, however, with a lack of major U.S. economic data likely to keep some traders on the sidelines.

Tomorrow's national day of mourning for former President George H.W. Bush may also limit trading activity, as the NYSE and the Nasdaq will be closed on the day and the release of most economic data has been postponed.

After moving sharply higher at the open, stocks gave back some ground but managed to remain firmly positive throughout the trading session on Monday. With the advance on the day, the major averages added to the substantial gains posted last week.

The major averages moved roughly sideways for much of the session before closing significantly higher. The Dow surged up 287.97 points or 1.1 percent to 25,826.43, the Nasdaq soared 110.98 points or 1.5 percent to 7,441.51 and the S&P 500 shot up 30.20 points or 1.1 percent to 2,790.37.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Tuesday, although Chinese stocks bucked the downtrend. China's Shanghai Composite Index rose by 0.4 percent, while Japan's Nikkei 225 Index tumbled by 2.4 percent.

Meanwhile, the major European markets have all moved to the downside on the day. While the French CAC 40 Index has fallen by 0.4 percent, the U.K.'s FTSE 100 Index and the German DAX Index are both down by 0.5 percent.

In commodities trading, crude oil futures are climbing $0.89 to $53.84 barrel after jumping $2.02 to $52.95 a barrel on Monday. Meanwhile, after surging up $13.60 to $1,239.60 ounce in the previous session, gold futures are rising $5.30 to $1,244.90 an ounce.

On the currency front, the U.S. dollar is trading at 112.87 yen compared to the 113.66 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1392 compared to yesterday's $1.1354.

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