By Medha Singh

(Reuters) – Wall Street was set to open slightly higher on Friday, extending a two-day rally amid volatile trading and raising hopes that the recent selloff may have eased for now.

The three main index futures rose more than 1 percent before paring some gains.

At 8:38 a.m. ET, Dow e-minis were up 0.43 percent. S&P 500 e-minis were up 0.38 percent and Nasdaq 100 e-minis were up 0.23 percent.

The final week of 2018 has seen wild swings in equities, with the CBOE Volatility Index, Wall Street’s main fear gauge, hitting its highest level since early February before easing slightly.

The benchmark S&P 500 tested its 20-month low early in the week and was at the brink of bear market territory before the three main indexes roared back with their biggest daily surge in nearly a decade on Wednesday and a late rally the following day.

On Thursday, the S&P fell as much as 2.8 percent but closed 0.8 percent higher as markets turned around late in the session.

In a sign of optimism on trade on Friday, China opened the door to imports of rice from the United States for the first time ever in the run-up to talks between the two countries in January.

“Yesterday’s reversal suggests the market has made a temporary bottom and we could probably rally well into the new year,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“In spite of the government shutdown, the market seems more concerned on trade talks, which are somewhat lifting the negative sentiment.”

Stocks could swing between gains and losses due to the volatility but end-of-the-year window dressing and investors looking to buy stocks at attractive valuations should end in a positive session, Cardillo said.

Heavyweight technology names including Microsoft Corp, Apple Inc and Amazon.com  – which were among the biggest boosts to Wall Street’s rally on Thursday – rose more than 0.5 percent in premarket trading.

Of the 30 Dow components, 29 were trading higher.

The three indexes are set to end the week with gains of more than 3 percent each, snapping three straight weeks of steep losses.

Still, the indexes are down more than 9 percent for December and remain on track for their biggest annual percentage drop since 2008.

Investors head into 2019 with a list of worries ranging from U.S.-China trade tensions, rising interest rates and a cooling economy to a partial U.S. government shutdown, which is now in its sixth day.

(Reporting by Medha Singh in Bengaluru; Editing by Anil D’Silva)