US stock futures showed mixed performance on Tuesday, following a strong AI-fueled rally on Monday. S&P 500 futures fell 0.3%, Nasdaq 100 futures fell 0.3%, and Dow Jones Industrial Average futures also decreased by 0.3%. This contrasted with Monday's gains where the S&P 500 advanced 1.5%, the Nasdaq Composite surged 2.3% to a record close, and the Dow gained 0.7%. The previous day's rally was largely driven by artificial intelligence and semiconductor stocks, with Meta Platforms jumping over 11%, Intel rising 12%, and AMD surging 10% to briefly reach a $1 trillion market valuation.
Oil prices played a significant role in market sentiment, with Brent crude initially sliding 2% on Monday but then rising above $101 a barrel on Tuesday. West Texas Intermediate crude fell 4.5% to $95.78 a barrel on Monday. This fluctuation reflects investor caution ahead of potential diplomatic talks between the US and Iran at the UN General Assembly, as increased energy supplies through the Strait of Hormuz could ease market pressures. Federal Reserve policymakers are also closely monitoring AI demand and oil price shocks as key inflation drivers, with traders seeing a 57.6% chance of another interest rate hike by at least 25 basis points in October.
The initial exuberance from Meta Platforms Inc.'s Muse AI agent, which saw its stock jump 11.3%, began to fizzle during the Asia session. Chip stocks that had benefited significantly from the AI trade, such as Nvidia, eased 0.2%, while US-listed shares of TSMC and SK Hynix lost over 1% each. Analysts noted that the rapid shift in risk appetite highlighted how vulnerable the AI trade remains to broader macroeconomic risks, including persistent inflation and the possibility of further interest rate hikes, as bond yields remain near multi-year highs. Geopolitical tensions, particularly surrounding the US-Iran conflict and a planned meeting between President Trump and Chinese President Xi Jinping, are also contributing to market caution.
