US stocks remained stable after a rally fueled by artificial intelligence, while falling oil prices, with Brent crude dipping towards $98 a barrel, helped alleviate concerns about inflationary risks from high energy costs. This reversal in oil prices came after reports that Iran proposed reopening the Strait of Hormuz if the US blockade is lifted, signaling potential diplomatic progress in the US-Iran conflict. Treasury yields also declined, with the 10-year rate down two basis points to 4.93%, and the dollar showed little change.
AI-related stocks saw mixed performance, following positive reception for Meta Platforms Inc.'s new AI agent, which had driven broad gains in the previous session. Microsoft Corp. rose 0.9% in premarket trading, leading gains among the Magnificent Seven, though an ETF tracking chipmakers was slightly lower. Analysts noted that investors are unlikely to short tech and AI before the third-quarter earnings season begins, and there's optimism that oil prices might decrease before the midterms, leading to market consolidation.
The overall market sentiment highlighted that confidence in the AI trade remains susceptible to macroeconomic risks. Despite some easing, bond yields are still near their highest levels in years, as traders continue to anticipate interest rate hikes and persistent fiscal shortfalls. However, some analysts believe US equities are poised to rally, citing falling energy prices, Meta's successful AI app, and the end of September seasonality concerns. Major central bank meetings are also concluded, suggesting that volatility in rates and foreign exchange is likely to remain contained with limited disruptive data this week.
Other notable market activities included SoftBank Group Corp. drawing over $20 billion in preliminary demand for a large junk bond deal, UBS Group AG advocating for less costly capital requirements, and Alibaba Group Holding Ltd. launching China's most powerful AI chip to compete with Nvidia Corp. On Holding AG also announced plans to increase constant currency sales by high teens through 2029. As of 7 a.m. New York time, S&P 500 futures were little changed, Nasdaq 100 futures rose 0.1%, and Dow Jones Industrial Average futures rose 0.3%.
