US STOCKS-Futures ease on fading rate cut hopes; Walmart rises on strong sales forecast

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Walmart expects 2025 annual sales above estimates

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Discover Financial jumps on Capital One's $35.3 bln buyout deal

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Home Depot forecasts 2024 sales below estimates, shares ease

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Futures down: Dow 0.29%, S&P 0.26%, Nasdaq 0.40%

(Updates at 0712 ET/1212 GMT)

By Amruta Khandekar and Bansari Mayur Kamdar

Feb 20 (Reuters) - U.S. stock index futures eased on Tuesday, as hopes for early interest rate cuts from the Federal Reserve waned, while Walmart's stronger-than-expected sales forecast for 2025 kicked off the earnings season for U.S. retailers on an upbeat note.

Last week's hotter-than-expected U.S. inflation data dealt a blow to market expectations for an imminent start to the Fed's easing cycle, halting a strong rally on Wall Street this year.

All three major indexes posted weekly declines on Friday after five straight weeks of gains, though the S&P 500 still closed above the 5,000 point mark.

Additionally, China's biggest ever reduction to its benchmark mortgage rate on Tuesday also failed to bolster investor confidence in its stock markets, pressuring broader risk sentiment.

"We still see equities higher between now and year-end, but the path is unlikely to be a straight line," said Mohit Kumar, Jefferies' chief economist for Europe, adding stock valuations look a bit stretched.

Goldman Sachs raised its year-end target for S&P 500 to 5,200, reflecting roughly a 4% upside from current levels, citing an improved earnings outlook.

Nearly 79% of traders are pricing in a rate cut of at least 25 basis points in June, while bets of a cut in May stand at 37% compared with 85% in mid-January, according to the CME Group's FedWatch tool.

Investors are awaiting the release of minutes from the Fed's latest policy meeting as well as remarks from a slew of central bank officials later this week. The economic data calendar this week is light.

As investors return following a long weekend, results from chip designer Nvidia will grab the spotlight after markets close on Wednesday and test market optimism around the potential for artificial intelligence (AI).

AI-fueled bets have helped Nvidia become the third-most valuable U.S. company and recently replace Tesla as Wall Street's most traded stock.

Shares of the chipmaker and Tesla fell nearly 1% each in premarket trading, underperforming other megacap stocks.

Walmart rose 2.4% after the U.S. retail giant forecast fiscal 2025 sales largely above Wall Street expectations and raised its annual dividend by 9%.

Smart-TV maker Vizio jumped 15.2% after Walmart said it would buy the company for $2.3 billion.

Home Depot shed 2.2% after it forecast 2024 sales below Wall Street estimates, signaling that lackluster home-improvement demand would continue to affect the company this year.

At 7:12 a.m. ET, Dow e-minis were down 113 points, or 0.29%, S&P 500 e-minis were down 13.25 points, or 0.26%, and Nasdaq 100 e-minis were down 71.5 points, or 0.4%.

Discover Financial Services surged 15.5% on Warren Buffett-backed consumer bank Capital One's plans to acquire the U.S. credit card issuer in a $35.3 billion deal.

Intel added 3.3% following a report on Friday that the Biden administration is in talks to award more than $10 billion in subsidies to the semiconductor firm.

GlobalFoundries climbed 8.3% after the U.S. government on Monday awarded $1.5 billion to the contract chipmaker to subsidize semiconductor production.

(Reporting by Amruta Khandekar and Bansari Mayur Kamdar; Editing by Shinjini Ganguli)