US STOCKS-Wall Street set for subdued open as investors assess data, Alphabet shines

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Futures: Dow up 0.06%, S&P 500 off 0.03%, Nasdaq down 0.23%

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Alphabet up after report on talks with Meta to supply AI chips

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Nvidia (NVDA), AMD lead declines after Alphabet report

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Retail sales, producer inflation data in focus

(Updates to before markets open)

By Johann M Cherian

Nov 25 (Reuters) - Wall Street's main indexes were set for a subdued start on Tuesday as investors took stock of a series of delayed economic data to gauge the health of the U.S. economy, while Alphabet gained after a report said Meta was in talks to spend billions on the Google parent's chips.

A Commerce Department report showed retail sales increased 0.2% in September, less than the 0.4% rise that economists polled by Reuters were anticipating, at a time when U.S. tariffs and a string of corporate layoffs have weighed on sentiment.

A separate report showed producer prices rebounded in September as the cost of energy goods surged and producers passed on some tariffs.

Trader bets for an interest rate cut of 25 basis points next month were little changed following the data and were last at an 84.7% chance, doubling from around 40% last week, according to the CME Group's FedWatch Tool.

Market sentiment has recently been supported by growing bets the Federal Reserve will lower borrowing costs in December following dovish remarks by voting members on the Federal Open Market Committee such as John Williams and Christopher Waller.

"The fact the parade of Fed speakers is going to end soon with the quiet period kicking in today, we'll likely have the potential for the rate cut kind of sit where it is. And while it might be a split decision, we're likely to get another rate cut and that's likely a positive for markets," said Art Hogan, chief market strategist at B. Riley Wealth.

At 08:53 a.m. ET, Dow E-minis were up 30 points, or 0.06%, S&P 500 E-minis were down 1.75 points, or 0.03%, with 166,901 contracts changing hands and Nasdaq 100 E-minis were down 57.75 points, or 0.23%.

AI OPTIMISM BOOSTS ALPHABET

Alphabet's shares were a standout, jumping 4% in premarket trading after a report said Facebook-parent Meta Platforms was in discussions to use Google's AI chips in its data centers from 2027 and rent chips from Google Cloud by next year.

Broadcom (AVGO), which helps Alphabet make its AI chips gained 4%, while Nvidia (NVDA) and Advanced Micro Devices (AMD) , which currently dominate the AI chips sector, fell nearly 4.7% and 7.5%, respectively.

Shares of the Google parent have rallied almost 70% this year, outperforming other megacaps and bringing it close to the prized $4 trillion market capitalization.

The Nasdaq logged its biggest one-day gain in six months on Monday, as investors scooped up tech stocks following several bouts of selling in recent weeks driven by worries of stretched valuations in the sector and high AI spending by large companies.

Meanwhile, the hunt for the next Fed Chair was on, with Treasury Secretary Scott Bessent saying the announcement could come as soon as pre-Christmas.

On the earnings front, department store operator Kohl's jumped 27.4% after raising its annual forecast. Apparel retailer Burlington Stores (BURL) tumbled 6.4% after its third-quarter revenue missed estimates.

For retailers, the holiday shopping season this month between the Thanksgiving holiday on Thursday through Cyber Monday next week will be crucial for sales.

Among other stocks, U.S.-listed shares of Alibaba rose 2.9% after the Chinese e-commerce giant beat analysts' estimates for quarterly revenue.

(Reporting by Johann M Cherian and Sruthi Shankar in Bengaluru; Editing by Krishna Chandra Eluri)