US stock set to open flat amid sharp drop in retail sales

U.S. stocks were set to open flat on Thursday, as a sharp drop in retail sales in December overshadowed optimism over a breakthrough in the U.S.-China trade talks.

Retail sales tumbled 1.2 per cent in the last month of 2018, the commerce department said, the largest decline since September 2009 when the economy was emerging from recession. Economists polled by Reuters had forecast retail sales increasing 0.2 percent. Retailer Target Corp's shares dipped over 1 per cent in premarket trading, while department store operators Macy's Inc and Nordstrom Inc shed more than 0.5 per cent.

"The numbers were a bit of a surprise on the downside and that is critical because this is for December and it suggests that people weren't spending enough on holiday sales shopping," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas. Futures gained earlier, as the U.S.-China trade talks entered a higher level. The sentiment was also boosted after President Donald Trump said the negotiations were "going along very well", and Bloomberg said Trump was considering pushing back the March 1 deadline for higher tariffs on Chinese goods by 60 days.

"It's continued optimism over the U.S.-China trade negotiations because the administration continues to hint that progress is being made," said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey. The S&P 500 index and the Nasdaq have ended higher since the latest round of talks started on Monday in Beijing, with the benchmark index closing above its 200-day moving average for the second straight day on Wednesday.

Easing tensions between the world's two largest economies also lifted crude prices, with oil majors Exxon Mobil Corp and Chevron Corp rising about 1 per cent. Meanwhile, the Congress is looking to end a dispute over border security on Thursday with legislation that would ignore Trump's request for funds to help build a U.S.-Mexico border wall.

At 8:51 a.m. ET, Dow e-minis were down 13 points, or 0.05 percent. S&P 500 e-minis was down 3.25 points, or 0.12 percent, and Nasdaq 100 e-minis were down 4.25 points, or 0.06 percent. The fourth-quarter earnings season is slowly tapering off, and about 71 percent of the S&P 500 companies that have reported earnings have topped expectations.

But outlook for the current quarter is less rosy. Analysts' now estimate current-quarter profit to decline 0.3 percent, which would be the first loss since the second quarter of 2016. Coca-Cola Co fell 3.9 percent after the soda maker forecast full-year profit well below expectations and reported a quarterly decline in volumes in North America.

Cisco Systems Inc rose 4 percent after the network gear maker's earnings beat estimates, driven by strength in its newer applications and security businesses. CenturyLink Inc tumbled 11.1 percent after the telecommunications service provider slashed its annual dividend by more than half.