US stock futures tick lower amid tech rotation, rate cut focus

Investing.com– U.S. stock index futures fell slightly in evening deals on Monday, as a rotation out of heavyweight technology stocks weighed on Wall Street, although anticipation of interest rate cuts limited overall losses. 

Sentiment towards technology soured this week ahead of quarterly earnings from artificial intelligence darling NVIDIA Corporation (NASDAQ:) on Wednesday, where investors will be watching to see whether the AI trade remains in play.

Expectations that lower interest rates will spark an economic recovery also spurred a rotation into more economically sensitive sectors.

fell 0.1% to 5,632.50 points, while fell 0.1% to 19,572.50 points by 19:32 ET (23:32 GMT). fell 0.1% to 41,309.0 points.

Dow clocks record high amid tech pivot 

The hit a record high on Monday as a rotation out of technology stocks favored the index’s constituents.

The Dow closed up 0.2% at 41,240.52 points. Losses in major technology stocks, especially Nvidia, saw the US500 fall 0.3% to 5,616.84 points, while the sank 0.8% to 17,729.28 points.

Tech skittish, Nvidia falls with earnings on tap 

Technology stocks retreated on Monday and were skittish in aftermarket trade, with focus squarely on Nvidia’s earnings on Wednesday.

Investors were especially antsy over Nvidia after earnings from other tech heavyweights suggested that AI may not be the stellar earnings driver as initially priced in. 

Nvidia fell 2.3% on Monday and was flat in aftermarket trade. But while the stock was pressured by a recent tech rout, it was still trading up substantially- around 150%- so far this year. 

The stock is at the heart of a massive AI-driven rally in valuations over the past year. But this rally was seen coming undone over the past two months, at least in the broader tech sector.

Still, earnings from other major chipmakers- namely TSMC (NYSE:) and ASML (NASDAQ:), released in July, suggested that at least the chipmaking sector was still primed to benefit from AI demand. 

Sept rate cut in focus, 25 bps reduction priced in 

Overall sentiment towards stock markets still remained relatively upbeat on the prospect of lower interest rates.

Dovish comments from Federal Reserve officials, especially Chair Jerome Powell, saw traders pricing in an at least 25 basis point cut in September, showed. 

But the Fed’s shift in tone, which came amid signs of a severely cooling labor market, raised some concerns over slowing economic growth.