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Wall St eyes higher open on China optimism, easing rate hike worries

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Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly

Wall Street’s main indexes were set to open higher on Monday on optimism around China reopening its borders, while signs of a cooling labor market boosted bets of a slower pace of interest rate hikes by the Federal Reserve.

After being clobbered in 2022 by rapid rate hikes, the benchmark S&P 500 (.SPX) and Nasdaq (.IXIC) snapped a four-week decline on Friday after a moderation in wage increases and a decline in U.S. services activity in December buoyed hopes of a less hawkish stance from the Fed.

“The number of jobs created is working its way down slowly and wages are starting to calm down. Both of those are important for inflation coming under control, without necessarily careening the U.S economy to a recession,” said Art Hogan, chief market strategist at B. Riley Financial.

The highly awaited U.S. Labor Department’s inflation report on Thursday is expected to show some moderation in year-on-year consumer prices in December.

Money market bets show 75% odds of a 25-basis point hike in the Fed’s February policy meeting, with the terminal rate expected just below 5% by June.

Other economic data such as weekly jobless claims and the University of Michigan’s consumer sentiment report will also be in focus this week, as big U.S. banks kick off the quarterly earnings season on Friday.

A slew of Fed officials including Chair Jerome Powell are due to speak this week, with investors parsing their commentary for more clues on the rate-hike trajectory.

U.S.-listed shares of Alibaba Group Holding Ltd rose 5.0% in premarket trading on news that Ant Group’s founder Jack Ma will give up control of the Chinese fintech giant in an overhaul.

Shares of other Chinese firms such as Baidu Inc and Pinduoduo Inc (PDD.O) rose 1.5% and 2.9%, respectively, as a full reopening of China’s borders, since the start of the pandemic, added to bets of a robust recovery in the world’s second-largest economy.

At 8:00 a.m. ET, Dow e-minis were up 103 points, or 0.30%, S&P 500 e-minis were up 16 points, or 0.41%, and Nasdaq 100 e-minis were up 56.75 points, or 0.51%.

Tesla Inc (TSLA.O) climbed 3.3% as the electric-vehicle maker indicated longer waiting times for potential buyers of some versions of the Model Y in China, signaling that recently announced price cuts could be stoking demand in the company’s second-largest market.

Macy’s Inc (M.N) and Lululemon Athletica Inc (LULU.O) dropped 4.7% and 10%, respectively, following dour holiday-quarter forecasts from both the retailers.

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