With the US midterm elections approaching, the market expects the rise in crude oil prices to peak, while AI and semiconductor stocks are likely to offer few cues for the time being. The view was expressed that attention would instead turn to high-dividend stocks and drone and autonomous-driving plays.
US markets fell at the start of the week amid concerns about a slowdown in the pace of AI development and rising long-term interest rates. The Dow Jones Industrial Average and Nasdaq closed below the previous Friday's levels, while the SOX Index also suffered a sharp decline. As selling pressure on AI-related stocks intensified, concerns about inflation following the rise in crude oil prices and expectations of tighter monetary policy weighed on technology stocks.
Anthropic CEO Dario Amodei, OpenAI CEO Sam Altman and Elon Musk made remarks suggesting that the pace of AI development should be restrained, which was identified as a potential negative factor for related stocks. Separately, President Trump discussed the relationship between the situation in the Middle East and AI development, suggesting that a reduced incentive to continue fighting could become a factor driving crude oil prices lower.
WTI crude oil futures temporarily reached $104.95, a four-month high, while the US 10-year Treasury yield reached its highest level in approximately 20 years. Higher crude oil prices are fueling inflation and strengthening expectations of interest-rate hikes by the Federal Reserve, limiting the upside for technology stocks, including AI and semiconductor stocks, across the market.
Before the US midterm elections on 3 November, tensions in the Middle East are unlikely to ease, and the timing of a peak in crude oil prices is viewed as dependent on supply-and-demand conditions after the elections. It has also been pointed out that mutual-fund tax-loss selling could make October prone to triggering new year-to-date lows, creating the possibility of further cash-raising sales. In the Japanese market, the Nikkei 225 is below its 25-day moving average, keeping medium- and long-term downtrends firmly in focus.