By Amruta Khandekar and Bansari Mayur Kamdar
(Reuters) -Wall Street was set for a subdued open on Monday after a scorching AI-led rally, as investors focus returned to potential rate cuts from the Federal Reserve that key inflation and other economic data expected this week could offer clues on.
The release of January's personal consumption expenditures price index (PCE)- the Fed's preferred inflation gauge - on Thursday could hinder the recent stocks rally if the data points to persistent price pressures.
A bumper forecast from heavyweight chip designer Nvidia in the previous week added to this year's artificial intelligence (AI) frenzy, propelling Wall Street to new peaks and overshadowing the gloom due to a likely delayed start to the Fed's easing cycle.
The S&P 500 and the Dow Jones industrials both notched all-time highs last week, while the tech-heavy Nasdaq came within a close range of its record intraday peak hit in November 2021.
Traders pushed back bets of the first rate cut to June from May earlier this month after hotter-than-expected readings on consumer (CPI) and producer (PPI) prices.
"The PCE price inflation index (is) expected to show a little bit more inflation, in line with the numbers that we saw with the CPI and PPI, so the markets are bracing for that," said Peter Cardillo, chief market economist at Spartan Capital Securities.
"In the near term, there's a distinct possibility that we're going to see (Treasury) yields move a bit higher."
Higher Treasury yields weigh on equity valuations as they make the returns on stocks less appealing and also increase the cost of capital for businesses.
Data on durable goods, consumer confidence and manufacturing activity will also be on investors' watchlist this week.
At 8:21 a.m. ET, Dow e-minis were down 16 points, or 0.04%, S&P 500 e-minis were down 0.75 points, or 0.01%, and Nasdaq 100 e-minis were up 11.25 points, or 0.06%.
Megacap growth stocks were mixed in premarket trading on Monday, though Nvidia continued to outperform with an advance of 1.1% after hitting $2 trillion in market value for the first time on Friday.
Micron Technology (NASDAQ:MU) gained 4.6% as it began volume production of semiconductors that will be used by Nvidia's AI chip.
Warren Buffett's Berkshire Hathaway (NYSE:BRKa) rose 1.9% after the conglomerate on Saturday posted its second straight record annual operating profit on a boost from its insurance business.
Domino's Pizza jumped 5.0% on surpassing Wall Street expectations for quarterly same-store sales, helped by a revamp of its loyalty program and its delivery partnership with Uber Eats.
Shares of Moderna slid 1.8% as HSBC downgraded the U.S. vaccine maker to "reduce" from "hold."
Intuitive Machines slumped 24.9% after the company said its spacecraft had tipped over shortly after touching down on the lunar surface.