US STOCKS-Wall Street eyes record open as Middle East tensions fade

U.S. stocks were set to open at record levels on Thursday after the United States and Iran pulled back from new military action while firming optimism about a U.S.-China trade deal added to the upbeat mood. China's commerce ministry said on Thursday that Vice Premier Liu He will sign a Phase 1 trade deal in Washington next week, raising hopes that a prolonged tariff war between the two sides will come to a close.

After a wobbly start in the new year on fears of all-out conflict in the Middle East, nerves eased on Wednesday as Washington and Tehran looked to defuse the crisis after Iran's retaliatory attack following the killing of a top general. "While geopolitical risks can trigger bouts of short-term volatility, investors should not ignore the recent improvements in selected economic indicators and earnings," strategists at Eastspring Investments said in a client note.

"Should the nascent recovery in the global economy continue, further upside in global markets is still possible." After a better-than-expected private payrolls report on Wednesday, investors are awaiting Friday's jobs report as well as fourth-quarter reports. Big U.S. banks will kick off the quarterly earnings season next week.

Earnings for the S&P 500 companies are expected to drop 0.6% in their second consecutive decline, according to Refinitiv IBES data. At 8:47 a.m. ET, Dow e-minis were up 113 points, or 0.39%. S&P 500 e-minis were up 11.5 points, or 0.35% and Nasdaq 100 e-minis were up 53.5 points, or 0.6%.

Apple gained 1.3% after government data showed iPhone sales in China in December jumped more than 18% year on year. Meanwhile, Jefferies raised its price target on the stock by $65 to $350. Jefferies also upgraded Snap Inc to "buy" as it expects improving user growth in international markets. The company's shares rose 4%.

Alphabet, Facebook, and Twitter rose between 0.8% and 1.7% as Cowen Equity Research raised its price target on the stocks after the brokerage's survey of U.S. ad buyers showed upbeat spending in 2020. Starbucks Corp rose 1.7% after Barclays raised the stock to "overweight", while Advanced Micro Devices Inc gained 2.2% after Mizuho recommended "buy" on the stock, citing an improving server market in 2020.

Shares in Kohl's Corp slid 7.9% after the department store operator forecast full-year earnings at the bottom end of an already lowered target. J C Penney Co Inc dropped 2.5% after disappointing same-store sales numbers.