Futures Slip as Fed Rate-Cut Hopes Fade

U.S. stock index futures fell Tuesday as concerns over lofty equity valuations and diminishing prospects for an interest rate cut weighed on sentiment, though attention remained on Nvidia's earnings and key government data due later this week.

Most heavyweight tech stocks were under pressure in premarket trading, with Amazon.com leading the declines, down 1.2%. Chip stocks, including Advanced Micro Devices and Broadcom also slipped early on.

Nvidia's quarterly results, due after markets close on Wednesday, are seen as a key test for the ongoing artificial intelligence-driven rally. The chip designer's shares were down 0.9%, extending Monday's near 2% drop.

Alphabet CEO Sundar Pichai said in an interview with the BBC published on Tuesday that no company would be unscathed if the AI boom collapses.

At 6:38 a.m. EST, S&P 500 E-minis were down 20.50 points, or 0.31%, Nasdaq 100 E-minis were down 89.50 points, or 0.38%, and Dow E-minis were down 226 points, or 0.48%.

With the earnings season starting to thin out, focus is on Dow component Home Depot's results on Tuesday.

Retail giants Walmart and Target are also set to report this week, with their results expected to provide key insights into the health of the American consumer.

Concerns of high valuations and growing skepticism over an interest rate cut by the Federal Reserve in December have led to a halt in U.S. stocks, with the S&P 500 down more than 3% from its October peak.

All the three benchmark indexes ended lower on Monday, with the S&P 500 and the Nasdaq closing below their 50-day moving average, often viewed as an important technical threshold, for the first time since late April.

The Dow closed below its 50-day moving average for the first time since October 10.

EYES ON DATA

Key economic data releases are expected in the next few days, after the longest government shutdown in U.S. history officially ended last week.

The much-delayed September jobs report is set to be released on Thursday, but may do little more than confirm earlier private market surveys pointing to a cooling labor market.

An August factory orders report is expected later on Tuesday.

Meanwhile, investors are increasingly scaling back their rate-cut expectations as some policymakers pushed against a reduction next month.

Traders now see a 46.4% chance of a cut in December, down from nearly 67% a week ago and a more than 93% chance recorded a month ago, according to the CME FedWatch Tool.

At least three Fed officials are expected to make public remarks in the day.

Among stock movers, Axalta Coating Systems climbed 10% after Dulux paint maker AkzoNobel said it plans to merge with the company.