Stocks are retreating in early trading, while oil prices and the US dollar are notably higher. Gold and silver are losing ground while Treasuries are flat.
Tech stocks are sliding after the leaders of three top AI companies warned that AI systems needed checks and balances before they got too powerful. The heads of xAI (Elon Musk), OpenAI (Sam Altman), and Anthropic (Dario Amodei) all agreed they need to focus on safety and model training, with Amodei saying “we could greatly reduce the risk that something goes seriously wrong” by doing so.
QQQ (Red), USO (Black) – YTD % Change
Source: TradingView
Altman added in a Fortune interview that OpenAI could postpone its Initial Public Offering to 2027 so it could focus on safety. Both his firm and Amodei’s were expected to go public this year, raising more than $100 billion in the process. Delays in AI progress and fundraising could dampen spending on AI infrastructure – crimping sales and earnings growth for companies that serve the industry. Heading into today, the Invesco QQQ Trust (QQQ) was up 16.6% year-to-date.
Meanwhile, oil prices are rising again amid greater tensions in the Middle East. Houthi rebels in Yemen took over more territory in the last few days, including a key port and island. That will allow them to apply greater pressure to oil shipments through the Bab al-Mandeb – which has served as an alternative path to global markets with traffic through the Strait of Hormuz reduced substantially. Proposed talks with Iran in Oman were also postponed on Sunday. The United States Oil Fund (USO) is up 124.6% YTD.
Finally, the Federal Reserve meets later this week – and rate futures markets are pricing in a high likelihood that policymakers will raise rates. The implied probability of a hike by Fed Chair Kevin Warsh and crew is running around 87%. Wall Street strategists say the stock market can withstand higher rates in the long term if underlying economic growth remains firm. But in the short term, they could weigh on investor sentiment.
