Wall Street on track to resume its rally on US-China trade talks progress

Wall Street was on track to resume its rally on Wednesday, after a pause in the previous session, on optimism over trade talks with Beijing and as China's economy showed new signs of recovery. White House economic adviser Larry Kudlow said on Tuesday that the United States and China "expect to make more headway" in trade talks this week, leading to hopes of a resolution to the months-long trade war between the world's two biggest economies. "The trade talks supposedly getting closer to an agreement, are definitely giving a positive lift to Asian and U.S. markets," said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.

"The market believes that's a good sign and it will be carried throughout the rest of the day." Chipmakers, which get a large part of their revenue from China, were higher in premarket trading. Advanced Micro Devices Inc, Micron Technology Inc and Intel Corp rose between 1.3% and 4.8%, while semiconductor stocks in Europe and Asia also rallied. Nomura Instinet started coverage of AMD and Intel with "buy" ratings, according to a report, and the brokerage expects a rebound in chip sales from 2020 to 2025 after a 10% decline this year. The Philadelphia Semiconductor index has surged nearly 24% this year on hopes of a trade deal and strengthening global demand for chips.

Global economic slowdown fears receded after a report which showed China's services sector rose to a 14-month high in March, following upbeat manufacturing data from China and the United States earlier in the week. At 8:40 a.m. ET, Dow e-minis were up 132 points, or 0.5%. S&P 500 e-minis were up 18.5 points, or 0.65% and Nasdaq 100 e-minis were up 51.25 points, or 0.68%. Wall Street came under pressure on Tuesday after three days of gains, but the S&P 500 closed near six-month highs and is now 2.2% away from a record high hit in September. The ADP National Employment Report showed U.S. private employers added 129,000 jobs in March, below economists' estimates and the lowest since September 2017.

All eyes will now be on the March nonfarm payrolls data on Friday, which is expected to show that the U.S. economy added 180,000 jobs in March, from 20,000 jobs in February. The Institute for Supply Management's report is likely to show that its services Purchasing Managers Index (PMI) came in at 58 points for March, down from 59.7 in February. The data is set to release at 10 a.m. ET. GameStop Corp fell 12.3% after the videogame retailer forecast current-quarter profit below analysts' estimates. Caterpillar Inc dropped 0.7% on a report that Deutsche Bank downgraded the company's stock to a "hold" rating. 

(With inputs from agencies.)