The Japan Times - US stocks retreat on AI warnings as oil prices, bond yields rise

Weakness in AI names including Nvidia, AMD and CoreWeave contributed to drops in Wall Street indices that were especially sharp early in the day. Losses tempered as the session progressed with crude oil prices and US bond yields moderating somewhat.

The broad-based S&P 500 finished down 0.5 percent.

On Saturday, Anthropic CEO Dario Amodei advocated for a coordinated slowdown of AI development to better understand the risks, drawing support from other industry leaders.

The comments drew a contemptuous response from President Donald Trump, who called fears that artificial intelligence could wipe out humanity a hoax and emphasized the need for the United States to win "a technological race" against China.

But the collective statement is worrisome because "the AI trade has been the engine of both the economy, and of the stock market over the last several years," said Adam Sarhan of 50 Park Investments.

It forced investors to "reassess the speed, scale and monetization timeline of the sector's capital expenditure boom," said Patrick Munnelly, a market strategist at Tickmill Group.

Oil prices jumped Monday after Saudi Arabia closed a key pipeline amid the Middle East war, deepening worries about sustained inflation that is expected to prompt higher interest rates from the US Federal Reserve.

After passing $109 a barrel earlier, Brent oil figures finished up about one percent at $105.68 a barrel.

A note from Briefing.com attributed the partial calming in oil markets to "some geopolitical optimism" after Trump said Iran wants to reach an agreement quickly and that the US is open to talks.

Treasury bond yields also came off a peak. The 10-year US Treasury note topped five percent early in the day for the first time since October 2023, but later pulled back.

Analysts widely expect the Federal Reserve, led by its relatively new chair Kevin Warsh, to raise interest rates since US inflation remains well above the central bank's two percent target.

"It would be a big -- a massive -- surprise if the Fed delivers anything else but that in terms of the rate decision itself," said Forex.com analyst Fawad Razaqzada.

But that would put the central bank on a crash course with Trump, who has pledged economic relief ahead of midterm congressional elections in November and who repeatedly slammed Warsh's predecessor, Jerome Powell, over monetary policy decisions.

Markets see "a 92 percent probability of a hike, with 50 basis points of cumulative tightening assumed by year-end", said Chris Weston, an analyst at Pepperstone.

- Key figures at around 2020 GMT -

Brent North Sea Crude: UP 1.0 percent at $105.68 per barrel

West Texas Intermediate: UP 1.3 percent at $101.39 per barrel

New York - Dow: DOWN 0.3 percent at 52,421.20 (close)

New York - S&P 500: DOWN 0.5 percent at 7,619.98 (close)

New York - Nasdaq: DOWN 0.6 percent at 26,181.41 (close)

London - FTSE 100: UP 0.4 percent at 10,697.57 (close)

Paris - CAC 40: DOWN 0.8 percent at 8,117.78 (close)

Frankfurt - DAX: DOWN 0.5 percent at 25,440.81 (close)

Tokyo - Nikkei 225: DOWN 0.8 percent at 63,492.99 (close)

Hong Kong - Hang Seng Index: UP 0.5 percent at 24,917.60 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,885.33 (close)

Euro/dollar: DOWN at $1.1547 from $1.1599 on Friday

Pound/dollar: DOWN at $1.3500 from $1.3524

Euro/pound: DOWN at 85.53 pence from 85.74 pence

Dollar/yen: UP at 154.34 yen from 153.61 yen

burs-jmb/jgc

K.Yoshida--JT