U.S. stock index futures fell in evening deals on Sunday, cooling after a rally on Wall Street as comments from Federal Reserve officials cemented expectations for a September interest rate cut.

But caution kicked in before a string of key signals this week, most importantly being earnings from market darling NVIDIA Corporation (NASDAQ:NVDA), which are due after the bell on Wednesday. PCE price index data- the Fed's preferred inflation gauge- is also due later in the week.

S&P 500 Futures fell 0.2% to 5,643.50 points, while Nasdaq 100 Futures fell 0.2% to 19,745.0 points by 19:45 ET (23:45 GMT). Dow Jones Futures fell slightly to 41,251.0 points.

Nvidia earnings on tap as AI rally falters

Nvidia is set to report its earnings for the three months to July on Wednesday, with focus squarely on whether the firm was able to maintain its pace of stellar earnings growth on a boost from artificial intelligence.

The chipmaker's earnings and outlook are also set to offer more cues on the state of AI demand, and come after a slew of mixed earnings from other technology heavyweights raised questions over just how much of an AI-fuelled market rally over the past year was justified. Majors such as Alphabet Inc (NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT) had fallen after their second-quarter earnings reports.

Nvidia, which makes the most advanced AI chips in the market, was a key benefactor of increased interest in AI, more than doubling in value and becoming one of the most valuable companies on Wall Street in the past year.

But this trend will be tested on Wednesday. Earnings from other chipmaking titans such as TSMC (NYSE:TSM) and ASML (NASDAQ:ASML), released in July, showed that at least chipmakers appeared to be still benefiting from AI demand.

PCE inflation on tap as Sept rate cut bets build

Focus this week is also on PCE price index data, which is the Fed's preferred inflation gauge. The reading is due on Friday and is likely to offer more cues on the path of interest rates.

Comments from Fed Chair Jerome Powell on Friday cemented expectations for an interest rate cut in September, although CME Fedwatch showed traders were split over a 25 or 50 basis point reduction.

The PCE inflation reading is likely to factor into bets on the size of the September cut.

Dow, S&P 500 close to record highs

Optimism over interest rate cuts saw Wall Street indexes come close to record highs on Friday.

The S&P 500 surged 1.2% to 5,634.61 points, while the Dow Jones Industrial Average rose 1.1% to 41,175.08 points. The NASDAQ Composite surged 1.5% to 17.877.79 points.

But while the Dow and the S&P 500 were in sight of recent peaks, the Nasdaq was still trading well below a record high hit earlier this year, as a mix of profit-taking and questions over the AI rally battered technology stocks in July.

Expectations of rate cuts also saw traders sell tech and pivot into more economically sensitive, value-oriented sectors. – Investing.com