Wall Street set for higher open as tax cut hopes outplay trade fears

By Shreyashi Sanyal

(Reuters) - U.S. stocks were set to open higher on Monday as hopes for a new round of tax cuts overshadowed fears of an escalation in the Sino-U.S. trade war.

Republicans in the U.S. House of Representatives plan to unveil a fresh round of tax cuts this week, hoping to draw a sharp contrast between themselves and Democrats ahead of the Nov. 6 congressional elections.

Dubbed "Tax Reform 2.0", the package is intended to augment Trump's 2017 tax overhaul, which added $1.5 trillion to the federal deficit through permanent tax cuts for U.S. companies.

A majority of the Dow Jones Industrial Average and S&P 500 components were flat to higher in premarket trading. They included the usually trade-sensitive Boeing, up 0.6 percent, and Caterpillar, up 0.6 percent.

"There is definitely a sense that Congress is going to get these tax cuts implemented before the end of this month and the positivity around that could be pushing the markets higher," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

"We will be seeing a relatively strong opening today because the markets are due for a rebound given the negative string we had last week."

At 8:49 a.m. ET, Dow e-minis were up 74 points, or 0.29 percent. S&P 500 e-minis were up 9.25 points, or 0.32 percent and Nasdaq 100 e-minis were up 36.25 points, or 0.49 percent.

While U.S. markets were poised for an upbeat session, world shares were under pressure due to the escalating rhetoric in the U.S.-China trade war.

On Friday, Trump said he was ready to levy additional taxes on practically all Chinese imports, threatening duties on $267 billion of goods over and above planned tariffs on $200 billion of Chinese products. China said it will respond if Washington takes any new steps on trade.

Shares of Apple were up 0.5 percent. The stock had dropped on Friday after the company said a "wide range" of products would be hit by the proposed tariffs, although it did not mention the iPhone.

Intel was up 0.6 percent. Its stock also fell Friday after the chipmaker said tariffs could slow down the adoption of 5G networks and hit companies that make desktop computers and laptops.

Nike edged up 1.1 percent after Wedbush said it sees scope for higher sales growth and margin expansion at the world's largest footwear maker.

Tesla rose 3.3 percent after brokerage Baird named the electric carmaker's stock its "fresh pick", saying strong fundamentals could drive shares higher ahead of the company's quarterly earnings.

CBS climbed 3 percent after top executive Leslie Moonves resigned on Sunday amid new allegations of sexual assault, and the company appointed six new board directors and reached an agreement to avoid a merger with Viacom - "clearing events" that brokerage RBC said should be a positive for the stock.

Alibaba fell 1.5 percent after the company said Jack Ma will step down as chairman in one year, passing on the reins to trusted lieutenant, Chief Executive Officer Daniel Zhang.

(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta)