Major US stock indexes opened lower on Tuesday as rising crude prices, elevated Treasury yields and uncertainty over the outlook for artificial intelligence demand weighed on investor sentiment.
The Dow Jones Industrial Average was down 253 points. The S&P 500 fell 0.23%, while the Nasdaq Composite declined 0.30%.
The cautious tone followed Monday’s selloff in technology stocks, which was driven partly by calls from leading artificial intelligence companies to slow the development of advanced AI models over safety concerns.
AI concerns keep technology stocks under pressure
Alphabet and Microsoft each fell about 1% in trading. Chipmakers, which suffered some of the sharpest losses during Monday’s session, traded in a narrower range on Tuesday.
On the otherhand, Nvidia shares rose around 1.12%, while other AI-linked stocks, including Advanced Micro Devices, Intel and Micron Technology, gained more than 1.6% in early trading.
The recent pressure followed calls from AI executives for a slower pace of model development.
However, the potential effect of such a slowdown on corporate spending and demand for computing infrastructure remains unclear.
The concerns have added to broader market uncertainty, with investors already dealing with above-target inflation and the prospect of higher borrowing costs.
Shares of Dave & Buster’s Entertainment fell more than 7% after the arcade and entertainment chain reported second-quarter revenue below expectations.
Meanwhile, Waystar shares climbed 6.7% after reports said that the healthcare software company was exploring strategic options, including a potential sale.
Oil prices and Treasury yields raise inflation concerns
Oil prices continued to rise as the conflict in the Middle East showed few signs of easing. Brent crude futures increased 0.6% to $106.31 a barrel, while West Texas Intermediate futures rose 1.2% to $102.59.
Crude prices extended gains after Saudi Arabia shut a key pipeline that bypasses the Strait of Hormuz.
The increase in energy prices has intensified concerns that a supply shock could push inflation higher.
The yield on the benchmark 10-year US Treasury note also reached 5.041%, its highest level since 2007, before easing slightly. It was later around 4.996%.
Higher Treasury yields can reduce the relative appeal of equities by increasing the return available from lower-risk government debt.
Rising yields can also place pressure on stock valuations, particularly in sectors whose expected earnings are further in the future.
Fed rate decision remains central to investor focus
Markets are preparing for the Federal Reserve’s policy decision on Wednesday.
Fed funds futures indicated a roughly 92% probability of a quarter-point rate increase from the current target range of 3.5% to 3.75%.
Recent economic data have provided limited relief for investors. Consumer prices accelerated in August, while a measure of underlying inflation recorded its largest increase in four months.
Barclays strategists said higher interest rates had already pressured equity valuations.
They warned that a sustained move above the 5% level for 10-year Treasury yields could become a more persistent headwind for stocks.
The strategists maintained a constructive base case for equities because of continued earnings momentum but cautioned that the risk of a sharper market repricing would increase if yields moved materially higher.
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