Stocks generally held steady after an artificial-intelligence driven rally, with attention turning to fluctuating oil prices and their impact on market sentiment and inflation fears. Brent crude initially erased gains to fall towards $98 a barrel after reports of Iran proposing to reopen Hormuz if the US blockade is lifted, though it later hovered near $100. West Texas Intermediate (WTI) crude also saw declines, settling around $90.52 a barrel.
The decline in oil prices helped to ease concerns about elevated energy costs and their inflationary risks. Treasury yields consequently turned lower, with the 10-year rate decreasing by two basis points to 4.93%. Despite these easing bond market pressures, bond yields remain near multi-year highs, as traders continue to anticipate imminent interest rate hikes by the Federal Reserve and persistent fiscal shortfalls.
AI-linked stocks showed mixed performance following a positive reception for Meta Platforms Inc.'s new AI agent. Microsoft Corp. rose 0.9% in premarket trading. However, the swings in sentiment highlight the vulnerability of the AI trade to broader macroeconomic risks. Federal Reserve officials, including Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin, indicated support for recent rate hikes and suggested that inflation risks still outweigh employment risks, with Collins expecting rates to remain unchanged in 2027 after another potential hike this year.
The S&P 500 futures were largely unchanged, while Nasdaq 100 futures saw a slight rise of 0.1%, and Dow Jones Industrial Average futures increased by 0.3%. The MSCI World Index remained largely flat. The dollar barely budged. Spot gold also fell, trading around $4,321.83 an ounce.
