Oct 26 (Reuters) – US stock index futures ticked higher on Monday as crude oil prices retreated from last week’s surge, lifting sentiment at the start of a week dominated by corporate earnings and the Federal Reserve’s interest-rate decision.
About one-third of S&P 500 companies are scheduled to report earnings this week, including hyperscalers Alphabet, Microsoft and Amazon.com, whose results would be closely watched for signs that hefty AI investments are paying off.
The focus follows a muted reception to earnings from AI-linked megacaps last week. Meta disappointed investors after it raised its annual AI spending forecast again and said it would sell new stock to help pay for it, while Tesla also fell after its results.
“Strong AI demand alone may no longer be enough. Markets want evidence of monetization, margins and cash flow,” said Charu Chanana, chief investment strategist at Saxo.
The AI trade has stumbled this month as fears grow that debt-fueled data-center spending could prove unsustainable in the face of rising borrowing costs.
Neocloud firms have been among the hardest hit, with CoreWeave and Nebius each losing more than 30% of their market value this month.
Shares of both the companies fell around 3% in premarket trading on Monday. IREN and Applied Digital also dropped 2.6% and 1.5%, respectively.
Elon Musk said in an X post on Sunday that markets have “almost entirely shut off access to money” for companies without substantial revenue independent of AI data centers, and predicted neocloud consolidation.
SpaceX won’t buy any neoclouds, he said, calling that “pointless”.
At 05:19 a.m. ET, Dow E-minis were up 257 points, or 0.49%, S&P 500 E-minis were up 23.25 points, or 0.3%, and Nasdaq 100 E-minis were up 73 points, or 0.25%.
Most megacap and growth stocks rose on Monday after the S&P 500 clocked losses for the last two weeks. Tesla led the advance with a 2.1% rise.
While concerns over higher bond yields and energy costs linked to Middle East tensions have rattled markets in recent weeks, expectations remain high for a robust earnings season.
Crude oil prices eased on Monday after hitting a near six-month high last week. On Sunday, Qatari mediators traveled to Tehran as part of an effort to de-escalate regional tensions in coordination with the United States.
EYES ON THE FED AND MIDTERMS
The Fed’s rate decision is due on Wednesday, with a pause widely expected after its September hike. Traders still see a December hike as firmly possible, and at least two 25-basis-point increases by mid-2027, according to LSEG data.
The Fed’s preferred inflation gauge, the Personal Consumption Expenditures index for September, is due on Thursday. Third-quarter GDP, expected to show 3.2% growth, is also due this week.
Besides, Wall Street is increasingly focused on the November 3 midterm elections, which will decide control of the US Congress.
Among early moving stocks, US-listed shares of Brazilian companies tumbled after President Luiz Inacio Lula da Silva won a historic fourth term on Sunday, in a shock result that defied polls. The iShares Brazil ETF slumped 27.3%.
Surgery Partners jumped 20.9% following media reports that US-based not-for-profit health system Bon Secours Mercy Health is in late-stage talks to buy a majority stake in the surgery operator.
(Reporting by Shashwat Chauhan in Bengaluru; Editing by Shilpi Majumdar)
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