U.S. stock index futures were lower in overnight trading on Sunday, slowing after a rally on Wall Street as comments from Federal Reserve officials bolstered expectations for an interest rate cut in September.
But caution is setting in ahead of a series of key signals this week, most notably earnings from Nvidia Corp. (NASDAQ:NVD), which are due after the close on Wednesday. The data — the Fed’s preferred gauge of inflation — is also due later in the week.
The S&P 500 index fell 0.2% to 5,643.50 points, while it was down 0.2% at 19,745.0 points by 19:45 ET (23:45 GMT). It was down slightly at 41,251.0 points.
Nvidia Earnings Headlines as AI Rally Stumbles
Nvidia is set to report earnings for the three months ending in July on Wednesday, with the focus squarely on whether the company can maintain its impressive pace of earnings growth thanks to artificial intelligence.
The chipmaker’s earnings and forecast are expected to offer further clues about the state of demand for artificial intelligence, and come after a string of mixed earnings from other big tech companies that have raised questions about the justification of the AI-fueled market rally over the past year. Shares of major companies like Alphabet Inc (NASDAQ:) and Microsoft Corporation (NASDAQ:) fell after their second-quarter earnings reports.
Nvidia, which makes the most advanced AI chips on the market, has been a major beneficiary of the surge in interest in AI, more than doubling its value and becoming one of the most valuable companies on Wall Street in the past year.
But that trend will be tested on Wednesday. Earnings from other chip giants like TSMC (NYSE:) and ASML (NASDAQ:), released in July, showed that chipmakers at least are still benefiting from demand for AI.
PCE inflation on the horizon as bets grow for September rate cut
Also in focus this week is the data, which is the Fed’s preferred measure of inflation. The reading is due out on Friday and is likely to provide further clues about the path of interest rates.
Comments from Federal Reserve Chairman Jerome Powell on Friday boosted expectations of a September interest rate cut, although traders were divided over a 25 or 50 basis point cut.
The PCE inflation reading is likely to be a factor in bets on the size of the cuts in September.
Dow, S&P 500 near record highs
Optimism about interest rate cuts helped push Wall Street indexes to near record highs on Friday.
The Dubai Financial Market General Index rose 1.2% to 5,634.61 points, while the Dubai Financial Market General Index rose 1.1% to 41,175.08 points, and the Dubai Financial Market General Index rose 1.5% to 17,877.79 points.
But while the Dow and S&P 500 were within striking distance of recent peaks, the Nasdaq was still trading well below its record high earlier this year, as a combination of profit-taking and questions about the rise of artificial intelligence weakened technology stocks in July.
Expectations of lower interest rates also prompted traders to sell technology and shift to more economically sensitive, value-focused sectors.