Nasdaq 100 Forecast: NDX slumps on AI warning

US futures        

Dow futures -0.21% S&P 500 futures -0.7%  & Nasdaq futures  -1.64%

European futures

FTSE 0.78%,  DAX  0.45%

• US fall led lower by tech stocks
• Anthropic CEO calls for a slowdown in AI development
• September Fed rate hike expectations rise to 90%
• Oil rises amid escalating Middle East tensions

U.S. stocks fall led by tech after Anthropic CEO warns to slow development

U.S. stocks are falling sharply on Monday, dragged down by a sharp sell-off in AI stocks after top U.S. executives called for a slowdown in development of AI technology owing to safety concerns

 anthropic CEO Dario Amodei called for AI companies to slow the pace at which they advance AI capabilities, with Elon Musk and Sam Altman agreeing.

These warnings come as a frenzied race to develop increasingly capable AI models is giving way to more of a sober reassessment. At a time when billions of dollars have been poured into AI, which has also been critical to strong equity markets and recent gains in recent years.

There are some questions surrounding the motive behind such announcements, with some investors suggesting that it could be a way to stifle smaller competitors.

Still, the market wasn't thinking twice. Losses in tech stocks are setting the tone for markets ahead of a potential Fed rate hike this week.

The markets are pricing in an almost 90% chance that the Fed will raise rates by 25 basis points. Attention will be on Fed Chair Kevin Warsh's statement, along with updated staff projections and the dot plot.

Corporate Movers

Chip stocks are under pressure after leaders within the AI space, including Anthropic CEO Dario Amodei, called for a slowdown in development of AI capabilities. Intel has dropped almost 6%, Marvel Technology is down 7.4%, and AMD is down 5%.

Cybersecurity stocks are rising amid worries around AI safety, increased following warnings from CEOs Elon Musk, Sam Altman, and Dario Amodei that technology was moving too fast. Palo Alto Networks is over 4% higher.

Energy stocks are rising, with the State Street Energy Sector SPDR ETF climbing over 1.2% ahead of the open as oil prices jump at the start of the week, with tensions in the Middle East rising.

Nasdaq Forecast – Technical Analysis

The Nasdaq is attempting to break below a key support around the 28,900 level, which has limited the downside on numerous occasions over the past few months. the price trades below its 50 EMA, and a break below this key support, together with the 100 EMA at 27,000, opens the door to 28,000, the June low.

Below here, attention turns to the 200 EM at 27,400.

Any recovery would need to retake the 50 EMA at 28,900 and the recent upper bound of the recent range at 29,700. Above here, 30,000 comes into focus as the psychological level, and the falling trend line resistance before attention will turn to 30,250, the July high, and 30,750, the record high.

FX Markets – Dollar Rises, EUR/USD Falls

The USD is Rising as attention turns to this week's Federal Reserve interest rate decision, where the Fed is expected to hike rates by 25 basis points. rising oil prices are also supporting safe-haven flows into the U.S. dollar.

EUR/USD is falling on USD strength and as oil prices rise above the $100-a-barrel level. the ECB hiked interest rates last week and may continue hiking should oil prices rise further. A high-rate environment could slow growth, which is starting to rebound.

GBP/USD is GBP/USD is falling sharply at the start of the new week, dropping to the 1,480 region amid USD strength and on expectations that the Bank of England will refrain from hiking interest rates this week.

Oil jumps after weekend attacks

Oil prices are rising around 3% on Monday, extending last week’s 8% gains and keeping crude at multi-month highs. After Friday’s modest pullback, renewed attacks and escalating Middle East tensions over the weekend have pushed supply concerns and the oil risk premium higher.

WTI is trading around $103, while Brent is near $107.

Houthis attacked Saudi Arabia, while fresh strikes were reported around the Strait of Hormuz. Saudi Arabia suspended operations on its crucial east-west pipeline, which serves as a key bypass to Hormuz. Without it, around 4% of global oil supply has no alternative route. Meanwhile, vessel traffic through Hormuz remains extremely low, while delayed talks on reopening the strait have added to supply concerns.

The impact is increasingly inflationary. U.S. diesel prices topped $6 a gallon for the first time last week, while Commerce Bank raised its diesel and Brent forecasts. With crude above $100 and diesel above $6, oil is becoming an inflation story as well as a commodity story.