U.S. stocks moved lower on Monday as Wall Street began a key week for economic data under pressure from high oil prices, rising Treasury yields and renewed concerns around the artificial intelligence trade.
Sentiment weakened further after OpenAI said it had paused training of its latest AI models. However, markets received some relief later in the session as crude oil prices gave back part of their earlier gains.
Reports suggested President Donald Trump could consider easing sanctions on Iran and releasing frozen Iranian assets in return for meaningful progress on Tehran’s nuclear program.
Wall Street Opens the Week Lower
At 15:29 ET, the NASDAQ Composite was down 0.8% at 26,851.79.
The S&P 500 fell 0.7% to 7,688.12, while the Dow Jones Industrial Average declined 0.6% to 51,495.96.
Technology stocks were among the weaker areas of the market as investors reacted to higher bond yields and fresh uncertainty surrounding the AI sector.
Oil Prices and Treasury Yields Remain Key Market Risks
Rising oil prices and higher Treasury yields have been two of the biggest challenges facing Wall Street over the past two weeks.
Oil has remained elevated as the United States and Iran continue to disagree over the Strait of Hormuz.
The two sides failed to achieve a major diplomatic breakthrough during talks surrounding last week’s United Nations General Assembly in New York.
That has kept uncertainty high around one of the world’s most important energy shipping routes.
Inflation Fears Push Treasury Yields Higher
Higher energy costs have also increased concerns about inflation.
At the same time, markets are watching the enormous amount of corporate debt being issued to finance artificial intelligence infrastructure projects.
A hawkish Federal Reserve, strong U.S. economic data and rising government borrowing have added further pressure to the bond market.
As a result, Treasury yields have climbed to some of their highest levels in decades.
Wall Street Remains Close to Record Highs
Despite the recent pressure, U.S. stocks have remained relatively resilient.
Strong earnings expectations and renewed optimism around artificial intelligence helped support markets last week.
Meta Platforms also attracted attention following growing interest in its new personal AI agent, Muse.
The S&P 500 remains only around 1.3% below its latest record close.
Meanwhile, the NASDAQ Composite returned to all-time highs last week for the first time since early June.
PCE Inflation Data Takes Center Stage
Investors are now preparing for several major U.S. economic releases that could influence the Federal Reserve’s next policy decision.
The Fed raised interest rates nearly two weeks ago for the first time in more than three years.
Policymakers also signaled that additional tightening may be required.
On Wednesday, markets will receive the latest Personal Consumption Expenditures price index.
The PCE index is closely watched because it is one of the Federal Reserve’s preferred measures of inflation.
Jobs Data Could Shape the Fed Outlook
Labor-market data will also be important this week.
The August Job Openings and Labor Turnover Survey is scheduled for Tuesday.
Investors will then focus on Friday’s September nonfarm payrolls report.
A strong jobs report could increase expectations for another Federal Reserve rate hike in October.
However, weaker hiring could raise concerns about slowing growth and the risk of stagflation.
Strong Economy Creates a Difficult Balance for Investors
Yerbol Orynbayev, former World Bank governor of Kazakhstan, said the U.S. economy continues to depend heavily on a strong labor market and major AI investment.
However, he warned that both factors are becoming increasingly complicated for investors.
Strong employment numbers could encourage the Fed to raise rates again.
On the other hand, a sudden slowdown in hiring could increase fears that economic growth is weakening while inflation remains elevated.
OpenAI Training Halt Hits AI Sentiment
Artificial intelligence stocks were also under pressure on Monday.
The Philadelphia Semiconductor Index traded without much momentum after OpenAI said it had paused training of its latest AI models.
The company reportedly made the decision after an increase in incidents involving AI agents behaving unexpectedly.
OpenAI said training would resume only after additional safeguards were in place.
The company also indicated that future pauses could occur if similar problems emerge again.
AI Safety Concerns Return to the Spotlight
The latest halt is the second reported pause in OpenAI model training within three months.
The development followed a disclosure that the company was investigating incidents involving AI agents searching U.S. government websites and acting in ways that had not been anticipated.
These reports have brought AI safety and regulation back into focus for investors.
The AI boom has become an important driver of capital spending, corporate earnings expectations and technology stock valuations.
Any prolonged slowdown in AI development could therefore have wider implications for financial markets.
Treasury Sell-Off Continues
Technology stocks also faced pressure from another sharp rise in Treasury yields.
The benchmark 10-year U.S. Treasury yield rose 5.6 basis points to 5.243%, reaching its highest level since June 2007.
The 30-year Treasury yield increased 5.8 basis points to 5.560%.
That placed it near its highest level since June 2004.
Higher Yields Pressure Technology Stocks
Rising bond yields can create particular challenges for technology companies.
Higher yields increase borrowing costs and can reduce the present value of future corporate earnings.
That often makes high-growth technology stocks less attractive relative to bonds.
The latest bond sell-off accelerated after recent economic data showed solid U.S. business activity.
That reinforced expectations that the Federal Reserve could raise interest rates again in October.
Bonds Become More Competitive With Stocks
Northwestern Mutual Wealth Management Chief Investment Officer Brent Schutte said rising interest rates are increasingly influencing daily moves across financial markets.
However, he also noted that higher bond yields create new opportunities.
With yields at their strongest levels in nearly two decades, fixed-income assets may become more attractive to investors seeking income.
Higher starting yields could also allow bonds to compete more effectively with equities for new capital, particularly as stock valuations remain elevated.
Oil Prices Give Back Early Gains
Oil prices initially surged on Monday, adding to pressure on stocks.
The move came after Trump said over the weekend that he had rejected an Iranian proposal related to reopening the Strait of Hormuz and ending hostilities.
Iran responded by saying it would not weaken its conditions for reopening the key maritime route.
That reduced hopes for an immediate diplomatic breakthrough.
Iran Sanctions Reports Ease Oil Pressure
Later in the session, oil prices lost much of their gains.
Several media reports suggested Trump could be willing to ease sanctions on Iran and release frozen assets if Tehran makes concrete progress on its nuclear program.
The reports quickly changed market sentiment.
Brent crude futures gave up a large part of their earlier advance and briefly moved lower before recovering.
They were last trading around 1.2% higher at $105.53 per barrel.
Markets Brace for a Volatile Week
Wall Street now faces several major risks at the same time.
Investors are watching U.S.-Iran negotiations, Treasury yields, oil prices, AI developments, inflation data and the labor market.
This week’s PCE inflation report and nonfarm payrolls figures could be particularly important.
Both releases could influence expectations for another Federal Reserve rate hike and determine whether the recent pressure on stocks and bonds continues.
