Stocks declined at the start of the week as major indices reacted to heightened uncertainty surrounding artificial intelligence (AI) development, rising Treasury yields, and surging oil prices. The S&P 500 dropped 0.48% to 7,619.98, the Nasdaq Composite fell 0.56% to 26,186.41, and the Dow Jones Industrial Average slid 152.09 points to close at 52,421.20. The declines came amid a selloff in global AI-related stocks following calls by leading figures, including Anthropic CEO Dario Amodei, to slow the pace of AI innovation due to safety concerns. Key chipmakers and AI companies such as Nvidia, Broadcom, AMD, and Intel experienced significant losses.

Investor attention was also drawn to the U.S. Treasury market, where the 10-year yield briefly touched 5%, its highest level since October 2023, ahead of the Federal Reserve’s September policy meeting. Market participants are pricing in a nearly 92% chance of an interest rate hike this week. Additionally, oil prices surged after Saudi Arabia shut down a crucial pipeline that bypasses the Strait of Hormuz following a drone attack, adding to geopolitical tensions in the Middle East. West Texas Intermediate crude settled at $101.39 per barrel, up 1.34%, while Brent crude finished at $105.68, rising 1.02%.

Bank of America’s shares fell sharply after CEO Brian Moynihan projected a decline in third-quarter investment banking fees of over 10% from last year and flat trading revenue, reflecting broader sector challenges. Meanwhile, software stocks bucked the broader tech weakness, with the iShares Expanded Tech-Software Sector ETF gaining approximately 5%, thanks largely to jumps in cybersecurity companies like SentinelOne, Zscaler, and CrowdStrike. However, some stocks like Arteris and Oracle weighed on gains with respective declines.

Amid continued worries about AI and geopolitical issues, market experts caution that the current environment may lead to further volatility and potential correction. Raymond James analysts highlighted weakening technical signals and diminishing momentum in major indices, suggesting increased risk in the coming months. Despite these headwinds, some investors believe that a slowdown in AI capital expenditures could ultimately bolster free cash flow and possibly lead to market multiple expansions in the near term. The week ahead remains pivotal with the Federal Reserve meeting and ongoing developments in AI regulation and Middle East tensions.