US STOCKS-US stock index futures edge up as markets digest corporate earnings

By Pranav Kashyap and Twesha Dikshit

Jan 29 (Reuters) - U.S. stock index futures edged higher on Thursday, as investors weighed results from tech mega-caps that included another surge in AI-related spending, while the Federal Reserve held rates steady as widely expected.

Meta META.O jumped almost 9% in premarket trading as the social media giant paired an upbeat revenue forecast with a 73% jump in this year's capex budget. Tesla TSLA.O rose 2.4% after outlining plans to more than double its capital expenditure to a record level.

Microsoft MSFT.O, however, dropped 7.5% as its cloud revenue failed to impress, stoking fears the hefty outlays behind its OpenAI alliance are not translating into monetization fast enough.

The latest results from three of the so-called "Magnificent Seven" companies suggest investors are willing to overlook massive AI expenditures so long as they expect them to yield tangible returns.

The group, which represents about one‑third of the S&P 500's market cap, has driven a sustained rally in U.S. equities, and continues to trade at elevated prices.

"Traders are no longer rewarding the biggest spenders, and Microsoft's elevated capex appears to have spooked them, leaving doubts that the continued spend will deliver a clear path to profit," said Jake Behan, head of capital markets at Direxion.

"Capex remains the market's central concern for hyperscalers, as trader focus shifts from growth optics to the timing and payoff of AI investment."

At 07:00 a.m. ET, Dow E-minis YMcv1 were up 9 points, or 0.02%, S&P 500 E-minis EScv1 were up 13 points, or 0.19%, and Nasdaq 100 E-minis NQcv1 were up 54.5 points, or 0.21%.

EARNINGS CHUG ON

In other notable earnings, Honeywell HON.O shares gained marginally after reporting a rise in quarterly revenue and profit, while Caterpillar CAT.N added 2% on posting a higher profit for the quarter.

Southwest Airlines' LUV.N shares rose 5.3% after the airline forecast a stronger-than-expected annual profit despite U.S. winter storm disruptions.

Dow DOW.N said it would slash about 4,500 jobs in restructuring, aiming to boost profitability by at least $2 billion. Shares fell 1%.

Apple AAPL.O rose 0.8% ahead of its results after markets close.

Bellwether IBM IBM.N jumped 9.5% after beating estimates in its fourth-quarter earnings.

FED DECISION AS EXPECTED

Chair Jerome Powell said the Fed would be data-dependent, and the upside risks to inflation and downside risks to employment had diminished.

Initial jobless claims data due at 08:30 am ET will be closely watched to get a read on the labor market. Traders kept their rate‑cut expectations intact, continuing to price the first reduction for June, according to CME's FedWatch tool.

The S&P 500 and the Dow closed virtually unchanged, while the Nasdaq managed only a small uptick.

Meanwhile, U.S. President Donald Trump and Senate Minority Leader Chuck Schumer moved to reach an agreement to negotiate new restrictions on federal immigration agents, potentially averting a government shutdown, the New York Times reported.

The funding deadline is Friday midnight.

Among other stock moves, rare-earth miners slid following a report the Trump Administration would step back from critical mineral price floors.

USA Rare Earth USAR.O fell 9.6%, MP Materials MP.N was down 5.1%, while Critical Metals CRML.O and United States Antimony UAMY.A dropped over 5% each.