By Amruta Khandekar and Bansari Mayur Kamdar
(Reuters) -Wall Street's main indexes were set to open lower on Tuesday as dwindling hopes for early interest rate cuts weighed on investor sentiment even as Walmart (NYSE:WMT) kicked off the earnings season for U.S. retailers on an upbeat note.
Last week's hotter-than-expected U.S. inflation data dampened market expectations for an imminent start to the Federal Reserve's easing cycle, halting a strong rally on Wall Street.
All three major indexes posted weekly declines on Friday after five straight weeks of gains, though the S&P 500 still closed above the 5,000 point mark.
Goldman Sachs (NYSE:GS) raised its year-end target for S&P 500 to 5,200, reflecting roughly a 4% upside from current levels, citing an improved earnings outlook.
Nearly 79% of traders are pricing in a rate cut of at least 25 basis points in June, while bets of a cut in May stand at 38% compared with 85% in mid-January, according to the CME Group's (NASDAQ:CME) FedWatch tool.
Investors are awaiting the release of minutes from the Fed's latest policy meeting as well as remarks from a slew of central bank officials later this week.
As investors return following a long weekend, results from chip designer Nvidia will grab the spotlight after markets close on Wednesday and test market optimism around the potential for artificial intelligence (AI).
AI-fueled bets have helped Nvidia become the third-most valuable U.S. company and recently replace Tesla (NASDAQ:TSLA) as Wall Street's most traded stock.
"There are two major themes investors are struggling with. The first one is the ever present question about the direction of interest rates," said Peter Andersen, founder of Andersen Capital Management in Boston, adding artificial intelligence (AI) was the second area of focus.
"Once (Nvidia's) results are digested, people will maybe adjust their expectations going forward about AI."
Shares of the chipmaker and Tesla fell over 1% each in premarket trading, underperforming other megacap stocks.
Walmart rose 3.0% after the U.S. retail giant forecast fiscal 2025 sales largely above Wall Street expectations and raised its annual dividend by 9%.
Smart-TV maker Vizio jumped 15.7% after Walmart said it would buy the company for $2.3 billion.
Home Depot (NYSE:HD) shed 2.3% after it forecast 2024 sales below Wall Street estimates, signaling that lackluster home-improvement demand would persist this year.
Additionally, China's biggest ever reduction to its benchmark mortgage rate on Tuesday also failed to bolster investor confidence in its stock markets, pressuring broader risk sentiment.
At 8:23 a.m. ET, Dow e-minis were down 135 points, or 0.35%, S&P 500 e-minis were down 18.75 points, or 0.37%, and Nasdaq 100 e-minis were down 78.5 points, or 0.44%.
Discover Financial Services (NYSE:DFS) surged 14.2% on Warren Buffett-backed consumer bank Capital One's plans to acquire the U.S. credit card issuer in a $35.3 billion deal.
Intel (NASDAQ:INTC) added 2.9% following a report on Friday that the Biden administration is in talks to award more than $10 billion in subsidies to the semiconductor firm.
GlobalFoundries (NASDAQ:GFS) climbed 6.9% after the U.S. government on Monday awarded $1.5 billion to the contract chipmaker to subsidize semiconductor production.