US stocks: US market edges lower as Middle East tensions offset AI optimism

Wall Street’s main indexes edged lower on Monday as investors evaluated escalating tensions between the US and Iran, even as strong revenue forecast from AI company Anthropic supported some technology stocks, Reuters reported.

Tehran will intensify tensions in the Strait of Hormuz and the wider region if diplomacy with Washington fails, a senior Iranian official told Reuters, signalling a shift in Iran’s policy from defence to offence.

Brent crude futures rose about 0.4%, while the S&P 500 energy sector gained 0.2%.


“(Investors) were telling themselves wars always come to an end. I don't think anyone was pricing in the fact that this could still be going as we approach the end of the summer,” said David Morrison, senior market analyst at Trade Nation.

Reuters reported on Friday that Anthropic, which is preparing for an IPO, forecast revenue of roughly $190 billion to $200 billion in 2028, citing two people familiar with the company’s finances.

Chipmakers led the gains, with Micron Technology rising 4.5% and SanDisk climbing 6.7%. The S&P 500 technology sector added 0.1%, limiting broader losses and keeping the tech-heavy Nasdaq near the flatline.

Investors will closely watch results from Nvidia, the world’s most valuable company, next week for indications of whether the technology-led momentum can continue. Nvidia shares rose 0.2% in early trading.

Danni Hewson, head of financial analysis at AJ Bell, said greater clarity over AI investments and their potential returns was easing immediate concerns about a “potential AI boom then bust”.

The Nasdaq Composite edged up 0.09% to 26,753.40, while the Dow Jones Industrial Average fell 0.18% to 53,635.58 and the S&P 500 slipped 0.09% to 7,778.92. Declines in UnitedHealth and McDonald’s weighed on the Dow.

Concerns about returns on AI investments have recently pressured chip stocks, but strong quarterly results and forecasts pointing to resilient demand have brought the Nasdaq closer to its record high.

The S&P 500 closed at a record high on Thursday after a series of softer inflation readings prompted traders to reduce bets on a Federal Reserve rate hike in September.

Traders now see a nearly 31% chance that the Fed will raise rates by 25 basis points next month, down sharply from the roughly even odds of a hike or a pause a week earlier, according to the CME FedWatch Tool.

However, the Wells Fargo Investment Institute revised its Fed outlook and now expects a 25-basis-point rate increase this year, compared with its previous forecast for no change.

Investors will also monitor quarterly results from retail bellwether Walmart and home-improvement retailer Home Depot, among the few major companies yet to report this earnings season.

Among other stocks, US-listed shares of Vista rose 5.3% after Peter Thiel acquired a 1% stake in the Latin American oil company.

Declining stocks outnumbered advancers by 1.55 to 1 on the NYSE and 1.43 to 1 on the Nasdaq. The S&P 500 recorded eight new 52-week highs and no new lows, while the Nasdaq Composite posted 29 new highs and 34 new lows.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)