May 3, 2018 / 1:04 PM / 6 months ago

US STOCKS-U.S.-China trade tensions, earnings set to pressure Wall St

* AIG slides after lower-than-expected Q1 profit

* U.S. team arrives in Beijing for trade talks

* Caterpillar drops after BofA downgrade

* Futures down: Dow 97 pts, S&P 6.75 pts, Nasdaq 22 pts (Adds comments, details, updates prices)

By Sruthi Shankar

May 3 (Reuters) - U.S. indexes were on track to open lower on Thursday as investors remained on edge about U.S.-China trade talks, while the latest round of earnings added little cheer.

Among early decliners were AIG, which dropped 6.7 percent after the insurer reported a lower-than-expected quarterly profit.

Tesla shed 7.7 percent, extending losses from Wednesday after Chief Executive Officer Elon Musk cut off analysts asking about the company’s profit potential, despite promises that production of the troubled Model 3 electric car was on track.

At 8:48 a.m. ET, Dow e-minis were down 97 points, or 0.41 percent. S&P 500 e-minis were down 6.75 points, or 0.26 percent and Nasdaq 100 e-minis were down 22 points, or 0.33 percent.

Wall Street closed lower on Thursday, weighed down by news about potential U.S. restrictions on Chinese telecommunications companies, and after the Federal Reserve reaffirmed outlook for more rate hikes.

“We weakened post the FOMC meeting and it’s a little bit of the same carrying over to today,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. “Augmenting it is some worries about trade negotiations with China that are underway and what may come of that.”

The central bank expressed confidence that a recent rise in inflation near to its target would be sustained, leaving it on track to raise borrowing costs in June, but emphasized the inflation target was “symmetric”, suggesting it was not inclined to speed up its tightening plans.

The focus now shifts to trade issues between U.S. and China as a Trump administration delegation, including Treasury Secretary Steven Mnuchin, visits Beijing for negotiations.

Data showed trade deficit with China for politically sensitive goods dropped 11.6 percent to $25.9 billion, which will do little to ease tensions between the two countries.

First-quarter earnings continued to come in strong, with nearly 80 percent of the 343 S&P 500 firms that have reported so far topping profit estimates.

Despite that, the rewards to profit beats have been subdued as investors worry that earnings may have peaked, after bellwethers including Caterpillar flagged concerns about rising costs.

“Though we’ve come out of great earnings and economic news has been decent enough, for one to think equity prices should move higher, market participants don’t seem to believe that they’re being given enough good news,” Luschini said.

Caterpillar was down 2.1 percent after BofA Merrill Lynch downgraded the stock to “neutral”, citing slowing retail sales and peaking Class 8 truck orders.

Kraft Heinz rose 2.8percent after its quarterly profit beat expectations, benefiting from U.S. tax changes and price hikes to counter higher input costs. (Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)

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