US stocks fall on AI fears as bond yields rise

Wall Street experienced a downturn on Monday due to investors' concerns over artificial intelligence (AI) and rising bond yields. Top executives from US AI companies expressed safety worries and urged for a slowdown in AI development. Investors were particularly unsettled by the 10-year US Treasury yield briefly rising above 5 percent for the first time since 2023 as the Federal Reserve's meeting approached.

The Federal Reserve is widely anticipated to increase interest rates. Consequently, AI-linked stocks plummeted globally following warnings from the leaders of Anthropic, OpenAI, and xAI regarding the risks associated with rapid AI development. Nvidia shares fell by 3.4 percent, while Micron Technology declined over 5 percent. Broadcom and Advanced Micro Devices each dropped more than 4 percent.

Brent crude futures rose by 1 percent to US$105.68 per barrel due to concerns about energy supply disruptions following new strikes on Saudi Arabian energy infrastructure and attacks on ships in the Middle East. Inflation, heavy borrowing by corporations and the government, and doubts about the long-term fiscal situation in the US have led to increased US Treasury yields over the past month.

The 5 percent mark that the 10-year yield reached on Monday is a threshold that analysts warn could disrupt the US economy and weaken the stock market rally by making US equities less attractive. Traders believe there is a 90 percent chance that the Federal Reserve will raise interest rates by 25 basis points at its policy meeting on Wednesday to combat inflation linked to high oil prices, according to CME's FedWatch.

The S&P 500 fell by 0.5 percent to close at 7,619 points, while the Nasdaq slipped by 0.6 percent to 26,186 points, and the Dow Jones Industrial Average declined by 0.3 percent to 52,421 points. The trading volume on US exchanges was heavier than usual, with 15.3 billion shares exchanged, compared to the average of 14.8 billion shares over the past 20 sessions.