The S&P 500 Index ($SPX) (SPY) closed down by -0.48% on Monday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down by -0.29%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -0.82%. E-mini S&P futures (ESU26) fell -0.46%, and September E-mini Nasdaq futures (NQU26) fell -0.77%.

Stock indexes settled lower on Monday, with the Nasdaq 100 falling to a 6-week low. Weakness in chipmakers and AI-infrastructure stocks drove the broader market lower on Monday after leaders of the biggest artificial-intelligence firms proposed slowing the technology’s development, raising concerns that efforts to rein in AI could curb billions of dollars in capital spending to build out the technology.

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On the positive side, software stocks rose on Monday as the threat of an AI spending slowdown dampens the risk of disruption to software companies. Also, bond yields gave up an early advance and turned lower on Monday after crude oil prices fell from their highs when President Trump said that Ukraine and Russia agreed to not attack each other’s energy targets.

AI stocks retreated on Monday after Anthropic CEO Amodei said his company would introduce fresh safeguards, urging the industry to slow the development of its most advanced AI models. OpenAI’s Sam Altman and xAI’s Elon Musk backed the proposal.

Stocks were also pressured on Monday as a rally in crude oil prices to a 3.75-month high raised inflation expectations and pushed global interest rates higher. The UK Gilt 10-year bond yield rose to a 19-year high of 5.43% on Monday, the 10-year German Bund rose to a 17-year high of 3.56%, and the 10-year T-note yield rose to a 2.75-year high of 5.01%.

Oct WTI crude oil prices (CLV26) rose more than +1% on Monday to a 3.75-month high on concern that global oil supplies will get even tighter after Saudi Arabia closed a major pipeline following attacks, disrupting a key route that bypasses the Strait of Hormuz. Saudi Arabia closed the East-West pipeline late last week, which carries 7 million bpd of crude, as a precaution following attacks by Houthi rebels and gave no indication of when it will reopen. The pipeline moves oil away from the Persian Gulf toward the Red Sea, where it can be loaded on tankers. Saudi Arabia told OPEC last Thursday that its crude production in August fell to 6.238 million bpd, the lowest since 1990.

However, crude prices fell from their best level after President Trump said that Ukraine and Russia agreed to not attack each other’s energy targets. Also, comments from US Energy Secretary Wright weighed on crude when he said that 12 million bbl of crude went through the Strait of Hormuz on Sunday, partially easing supply fears.

Markets are discounting a 92% chance of a +25 bp Fed rate hike at the Tue/Wed FOMC meeting.

Overseas stock markets settled lower on Monday. The Euro Stoxx 50 fell to a 6-week low and closed down -1.02%. China's Shanghai Composite closed down -0.07%. Japan's Nikkei-225 Stock Average dropped to a 6-week low and closed down -0.81%.

December 10-year T-notes (ZNZ6) closed up by +2 ticks on Monday. The 10-year T-note yield fell -0.8 bp to 4.959%. T-notes recovered from a new 2.75-year nearest futures low on Monday and settled higher, and the 10-year T-note yield fell from a 2.75-year high of 5.012%. Short covering emerged in T-note prices on Monday after crude oil prices fell from their high when President Trump said Ukraine and Russia agreed to stop attacking each other’s energy targets. Also, Monday’s stock weakness boosted some safe-haven demand for T-notes.

T-notes initially fell on Monday after WTI crude oil rallied to a 3.75-month high. The higher crude oil prices boosted inflation expectations, a negative factor for T-notes. Also, heightened expectations of a 25 bp interest rate hike by the Fed at the Tue/Wed FOMC meeting are weighing on T-note prices.

European government bond yields moved higher on Monday. The 10-year German bund yield climbed to a 17-year high of 3.555% and finished up +1.3 bp to 3.518%. The 10-year UK gilt yield climbed to a 19-year high of 5.434% and finished up +2.4 bp to 5.367%.

ECB Executive Board member Isabel Schnabel said recent energy price developments have been "quite concerning" as officials weigh further interest rate increases.

ECB Governing Council member Peter Kazimir said that inflation risks are "clearly tilted to the upside" and the ECB will raise interest rates further if necessary.

Markets are discounting a 69% chance of a +25 bp ECB rate hike at the ECB’s next meeting on October 29.

Chipmakers and AI stocks sold off on Monday, weighing on the broader market. The iShares Semiconductor ETF (SOXX) fell more than -5% to a 1-week low. Teradyne (TER) closed down more than -13% to lead losers in the Nasdaq 100, and Arm Holdings (ARM) closed down more than -9%. Also, Lam Research (LRCX) closed down more than -8%, and ASML Holding NV (ASML) closed down more than -7%. In addition, Marvell Technology (MRVL), KLA Corp (KLAC), and Applied Materials (AMAT) closed down more than -6%, and Intel (INTC), NXP Semiconductors NV (NXPI), and Micron Technology (MU) closed down more than -5%. Finally, Advanced Micro Devices (AMD), Analog Devices (ADI), Broadcom (AVGO), SanDisk (SNDK), and Western Digital (WDC) closed down more than -4%, and Nvidia (NVDA) and Microchip Technology (MCHP) closed down more than -3%.

Bank stocks retreated on Monday, led by a -4% fall in Bank of America (BAC) after CEO Moynihan said that sales and trading have been “relatively flat” in Q3 compared to a year earlier. Goldman Sachs (GS) and Morgan Stanley (MS) also fell more than 3%. In addition, Citigroup (C), JPMorgan Chase (JPM), Bank of New York Mellon (BNY), and Wells Fargo & Co (WFC) closed down more than -1%.

Software stocks gained on Monday after AI leaders called for a slower development of the technology. Thomson Reuters (TRI) closed up more than +8%, and Autodesk (ADSK), Atlassian Corp (TEAM), and ServiceNow (NOW) closed up more than +7%. Also, Adobe Systems (ADBE) and Intuit (INTU) closed up more than +5%, and Datadog (DDOG) and Workday (WDAY) closed up more than +4%. In addition, Salesforce (CRM) closed up more than +4% to lead gainers in the Dow Jones Industrials.

Cybersecurity stocks rallied sharply on Monday. Zscaler (ZS) closed up more than +16%, and SentinelOne (S) closed up more than +14%. Also, Palo Alto Networks (PANW) closed up more than +13%, and CrowdStrike Holdings (CRWD) closed up more than +13% to lead gainers in the S&P 500 and Nasdaq 100. In addition, Okta (OKTA) closed up more than +12%, Fortinet (FTNT) closed up more than +9%, and Cloudflare (NET) closed up more than +7%.

Corning (GLW) closed down more than -13% to lead losers in the S&P 500, after entering into a $2 billion equity distribution agreement with Goldman Sachs.

Hewlett Packard Enterprise (HPE) closed down more than -10% after Evercore ISI downgraded the stock to inline from outperform, citing valuation.

Definium Therapeutics (DFTX) closed up more than +3% after announcing that a late-stage trial of its investigational pill for generalized anxiety disorder met its primary and key secondary efficacy endpoints.

Critical Metals Corp (CRML), Evolution Petroleum Corp (EPM), Forgent Power Solutions Inc (FPS).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.