US Stocks Start Week Muted

Tech stocks slipped and pressured US equity indices on Monday, extending their pullback from record highs, while high energy prices maintained risks of higher inflation. The S&P 500 and the Nasdaq dropped 0.3% and 1%, respectively, but the Dow was flat on strength for traditional sectors of the economy. AI infrastructure companies were sharply lower as lower risk sentiment and lingering skepticism on the magnitude of AI spending growth trimmed the sector's rally from this year. Micron, Applied Materials, and Sandisk dropped between 5% and 7%. Additionally, Seagate plunged 8% after its rhetoric from its management cast doubt on the sustainability of memory chip demand. Consistently, AI hyperscalers were lower with Tesla and Oracle dropping 3%. Also, Nvidia shares retreated 2% ahead of its earnings this week, seen as a bellwether for AI demand globally. Chevron, 3M, and Honeywell were sharply higher to support the Dow.

Gold prices fell to the $4,550 per ounce mark on Monday, testing their lowest since late March as pro-inflationary forces backed the likelihood of a hawkish response by the Federal Reserve. The US and Iran maintained their stalemate over the weekend, prolonging the blockade of commercial vessels crossing the Strait of Hormuz to extend the global shortage of oil and refined fuel. Energy prices rose further to test their post-war peaks, adding to pre-inflationary risks and strengthening the argument for hawkish members in the Fed and other major central banks. Higher energy prices had already triggered a surge in producer prices in April, while consumer inflation rose to a three-year high. Restrictive interest rates lift bond yields and drive investors to favor fixed-income assets instead of coupon-less precious metals, pressuring bullion prices.

US equities were mixed on Monday following the late pullback from records last week as macroeconomic headwinds offset the speculative rally in AI infrastructure companies this year. The S&P 500, Nasdaq, and Dow hovered around the flatline. The stalemate between Iran and the US maintained expectations of a prolonged suspension in energy exports from the Middle East, lifting bond yields and sustaining their broad-based pressure on equities. Consistently, the Federal Reserve is expected to maintain their rates at a restrictive territory in the coming meetings despite incoming-Chairman Warsh's preference for lower rates. AI hyperscalers, which track risk sentiment due to their speculative nature, were mixed with Tesla and Meta dropping over 1%, while Alphabet and Microsoft were 1% higher. In turn, AI infrastructure was mostly higher with Nvidia adding 0.5% ahead of its key earnings results this week.