S&P 500 Forecast: SPX higher as oil & yields fall, AI stocks rise

US futures        

Dow futures 0.26% S&P 500 futures 0.83%  & Nasdaq futures  1.76%

European futures

FTSE 0.70%,  DAX  1%

• US stocks jump after a flat week last week
• Falling oil prices & Treasury yields lift stocks
• AI stocks rise after recent weakness
• Oil falls on hopes of diplomacy in the Middle East

Stocks rise as oil and Treasury yields fall

U.S. stocks have opened higher as Treasury yields retreat and crude oil prices fall to an 11-day low.

Even though Washington and Tehran are exchanging new threats over the weekend, Trump has suggested he would be open to meeting the Iranian president, who is expected in New York for the UN General Assembly. This has helped oil prices fall further, easing inflation concerns and putting downward pressure on Treasury yields.

At the same time, AI companies and tech stocks are rising, boosted by renewed optimism towards the AI trade. This comes following a rout earlier in the month after Anthropic's CEO warned of a need to slow AI development.

Sticking with AI, U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng concluded talks on Sunday, which revolved around the creation of a potential AI safety notification mechanism.

Looking across the week, 10 Fed officials are scheduled to speak, providing further clues over the Federal Reserve's next moves. This comes at a time when the market is pricing in a 50% chance of another rate hike next month.

Elsewhere, the U.S.-China summit on Thursday could also touch upon plenty of subjects, including the trade truce between the two superpowers, the Iran war and AI regulation. The meeting is unlikely to be particularly market-moving, but the right mood music could help support market sentiment and equities.

Corporate Movers

Paramount and Warner Bros. Discovery shares have jumped 7.5% and 7%, respectively, on reports that Paramount and California's attorney general discussed settlement details over a lawsuit that was blocking the merger between the two giants.

Accenture has jumped over 6% after saying on Friday that it would partner with Anthropic and evaluate the AI company's model. Both companies would invest at least $1 billion in building capacity in this area.

Novo Nordisk has fallen almost 5% after investors were unimpressed by the company's long-term goals for competing in the weight-loss market. The Denmark-based company plans to launch at least five drugs by 2030.

Coinbase and other cryptocurrency stocks are on the rise after Bitcoin climbed to $85.2K, a level last seen on January 29.

S&P 500 Forecast – Technical Analysis

The S&P 500 is breaking out above the descending channel within which it has traded since mid-August. The price has risen to 7,700, also testing the rising trend line dating back to April.

A rise above 7,700 brings the September high into focus before attention turns to 7,810 and fresh record levels.

On the downside, support is seen at 7,615, the 50 SMA and the June high. Below here, attention turns to 7,500, the September trend line, before 7,300 comes into focus.

FX Markets – Dollar rises, GBP/USD falls

The USD is rising, adding to gains last week after the Federal Reserve hiked interest rates and pointed to more rate hikes this year. Stronger upcoming U.S. data and further gains in energy prices could see the market increase expectations for an October rate hike, which would support the dollar.

EUR/USD is consolidating last week's decline, with prices remaining below 1.1500. The decline in oil prices has failed to provide significant support to the euro, which remains on the defensive amid growing political uncertainty in Germany and following the hawkish Fed meeting.

GBP/USD is struggling to extend Friday's rebound from the 1.3500 area, its lowest level since July 30. While stronger retail sales on Friday helped to strengthen the pound, the move has lacked follow-through. Instead, Fed-BoE divergence continues to favour the bears.

Oil falls to an 11-day low

Oil prices have fallen to an 11-day low, dropping below the $100-a-barrel threshold on hopes for diplomatic progress between the U.S. and Iran and amid a partial recovery in exports from Saudi Arabia.

Despite Iran and the U.S. exchanging new threats on Sunday, Trump also said he was open to a meeting with the Iranian president, who will be at the United Nations General Assembly in New York this week.

Fighting in the Middle East has continued, as Yemen's Iran-backed Houthis said they attacked more targets in Saudi Arabia while pushing to cut off the Red Sea coast.

China has reportedly asked Iran to help rein in the Houthis.

Meanwhile, Middle East data has shown that oil flows remain surprisingly strong, given the disruption to Saudi Arabia's East-West pipeline. Saudi Arabia has lifted oil moving through the Strait of Hormuz to 2.9 million barrels a day over the past six days, up from just 700,000 barrels a day in August.

Increased supply out of Saudi Arabia has helped pull oil prices down 10% since Wednesday last week.

However, the situation remains very fluid.