Wall Street set for higher open as U.S.-China trade talks advance

By Amy Caren Daniel

(Reuters) - Wall Street was set to open higher on Friday as trade talks between the United States and China advanced, although worries of a cooling domestic economy kept a lid on gains.

Talks to resolve the bruising trade war will continue next week in Washington, with both sides saying this week's negotiations in Beijing made good progress.

Hopes of a trade deal ahead of a March 1 deadline has helped the trade-sensitive industrial sector gain nearly 16 percent this year, making it the best performing S&P sector.

But the optimism was clouded by data on Thursday which showed retail sales in December suffered their biggest drop in more than nine years, resulting in the S&P 500 index breaking its four-day winning streak.

Still, the benchmark index was above its 200-day moving average, a key technical level, for the third straight session.

"The market is predicated on a positive outcome from the trade negotiations, it's as if we are in a so-far-so-good phase in the negotiation process," said Art Hogan, chief market strategist at National Securities in New York.

"We are seeing an overhang from the retail sales data that came out yesterday as it is a new area of concern."

Another concern for markets was a threat by President Donald Trump to declare a national emergency in an attempt to fund his U.S.-Mexico border wall without congressional approval.

Still, he agreed to sign the bill that lacked money for his wall, but prevents another damaging government shutdown.

At 8:26 a.m. ET, Dow e-minis were up 50 points, or 0.2 percent. S&P 500 e-minis were up 6 points, or 0.22 percent and Nasdaq 100 e-minis were up 16.5 points, or 0.24 percent.

Also in focus was China's factory-gate inflation, which slowed to its weakest pace since September 2016, raising concerns of deflation as domestic demand cools.

PepsiCo Inc shares rose 1.7 percent after the soda maker forecast increase in revenue growth, although it warned that profit would fall partly because of a strong dollar.

Rival Coca-Cola Co, up 0.4 percent, had also warned on the impact of a strong dollar when it reported results on Thursday. Nvidia Corp rose 5.8 percent after the chipmaker forecast sales for its current fiscal year above expectations.

Economic data on tap includes industrial production due at 9:15 am ET, which is expected to have risen 0.1 percent in January, compared with December's reading of 0.3 percent.

The University of Michigan U.S. February consumer sentiment index is expected at 10 a.m. ET.

(Reporting by Amy Caren Daniel and Shreyashi Sanyal in Bengaluru; Editing by Arun Koyyur)