U.S. equity futures showed little net movement on Monday as investors absorbed last week’s tech sector weakness and readied themselves for a slate of important economic releases and central bank commentary. After three straight sessions of declines, the S&P 500 and the Nasdaq bounced back on Friday, but attention has shifted to whether recent heavy capital expenditure plans from Big Tech will translate into tangible returns for AI beneficiaries.
Software stocks faced renewed pressure on concerns that increased competition from AI investments could erode margins. In premarket trading most software-related names were higher, led by Datadog, which rose 1.4%. CrowdStrike, Atlassian and ServiceNow gained in the range of 0.7% to 1.1%.
The Dow was a relative outperformer last week, closing above 50,000 points on Friday for the first time and posting weekly gains as investors rotated into different areas of the market. The small-cap Russell 2000 also saw inflows and benefited from that rotation.
At 04:52 a.m. ET, futures contracts showed the following moves: Dow E-minis were up 46 points, or 0.09%; S&P 500 E-minis were down 4 points, or 0.05%; and Nasdaq 100 E-minis were lower by 50.25 points, or 0.2%.
Investors have earmarked chipmaker Nvidia’s upcoming earnings report later this month as a crucial checkpoint for the AI trade, seeking evidence that corporate capital spending will generate measurable revenue gains. This test comes as market participants weigh large capex commitments against expectations for profit improvement.
This week’s economic calendar will be dominated by two U.S. data points that could influence the Federal Reserve’s expected path for interest rates: the January nonfarm payrolls report, delayed to Wednesday because of a partial government shutdown, and the January consumer price index, due on Friday. Both releases are being viewed as pivotal inputs for rate expectations.
Market pricing, as reflected in the CME Group’s FedWatch tool, currently assigns the first Fed rate cut to June. The commentary noted that June could coincide with the potential transition to a new Fed chair should President Trump’s nominee, Kevin Warsh, assume the role.
In individual stock action, Eli Lilly shares rose 2.1% in premarket trading after telehealth firm Hims & Hers canceled plans to launch a $49 weight-loss pill over the weekend following legal threats from the U.S. Food and Drug Administration and Wegovy maker Novo Nordisk. Hims & Hers shares fell 14% on the news.
Corporate earnings season continues to progress. Of the 293 S&P 500 companies that have reported so far for the quarter, roughly 77% have beat analysts’ expectations, compared with a long-term average beat rate of 67%, according to LSEG data. Companies slated to report before the opening bell on Monday include Kyndryl, Becton Dickinson, Apollo Global Management and Loews Corporation. Software firms AppLovin and Datadog are scheduled to report later in the week.
Markets will also be watching remarks from several Federal Reserve officials later in the day, with Christopher Waller, Stephen Miran and Atlanta Fed President Raphael Bostic on the speaking calendar.
In other company news, Kroger shares rose 6% after a report said the grocery chain plans to appoint former Walmart executive Greg Foran as its chief executive officer.
Summary
Futures were mostly flat as investors waited for key U.S. labor and inflation data and for corporate earnings to provide clarity on whether heavy AI-related capital spending will pay off. Software names showed mixed premarket strength while healthcare and consumer headlines moved individual stocks during early trading.
Key points
- Markets are cautious ahead of January nonfarm payrolls and the January consumer price index, both of which could influence Fed rate expectations.
- AI-related capital expenditure plans from large tech companies have increased scrutiny of software profit margins and the sustainability of the AI trade; Nvidia’s upcoming earnings represent a major test.
- Healthcare and consumer sectors moved on company-specific news: Eli Lilly gained after Hims & Hers canceled a drug launch following FDA and competitor pressure, while Kroger rose amid CEO succession reports.
Risks and uncertainties
- Economic risk: The January nonfarm payrolls and consumer price index releases could shift expectations for the timing of Federal Reserve rate cuts, affecting equity valuations across sectors.
- Sector execution risk: Heavy capex by Big Tech may not produce near-term measurable revenue gains, putting pressure on software margins and investor expectations.
- Regulatory and competitive risk: The cancelation of Hims & Hers’ planned weight-loss pill launch following FDA and competitor legal threats highlights potential regulatory and litigation risks in the healthcare and pharma-adjacent sectors.