Dow, S&P 500, Nasdaq Futures Mixed Ahead Of Fed Rate Decision As AI Uncertainty Mounts: IOVA, PLAY, ELMT, RBLX Stocks In Focus

• Markets are pricing in a 92.4% chance of a rate hike by a quarter-percentage point in the upcoming meeting, according to data from the CME FedWatch tool.
• An industrywide split over the pace of artificial intelligence development weighed on AI stocks, dragging down markets.
• Long-term bond yields have also been climbing, even after the U.S. Department of the Treasury said last week it will triple its upcoming debt buyback plan to $6 billion.

U.S. stock futures were trading mixed in the overnight session late Monday as markets look ahead to the Federal Reserve’s September policy meeting, with an overwhelming majority expecting the central bank to hike interest rates. 

Meanwhile, an industrywide split over the pace of artificial intelligence development weighed on AI stocks. 

Dow futures fell 0.11%, while the S&P 500 was flat and the Nasdaq-100 climbed 0.05% at 10:27 PM EDT.  

On Monday, all three benchmark indexes closed lower amid ongoing AI pressures and rising oil prices. The Nasdaq Composite led the decline, shedding more than 146 points to close 0.56% lower. The Dow Jones Industrial Average and S&P 500 lost 0.29% and 0.48% at close, respectively.   

Key US Market Drivers

At the start of the week, markets fell as concerns about AI’s growth spread across the industry. 

Over the weekend, AI leaders were split over the technology's rapid development, with Anthropic CEO Dario Amodei outlining a plan to slow the pace of development, and OpenAI CEO Sam Altman and SpaceX CEO Elon Musk also backing the suggestion that AI requires more oversight. However, Microsoft and Meta Platforms leaders opposed slowing down. Altman also said over the weekend that OpenAI would not go public this year amid AI safety concerns. 

AI stocks, including leading chipmakers, declined on Monday. Nvidia Corp. (NVDA) lost more than 3% of its value at close, while Micron Technologies (MU) fell more than 5%. The iShares Semiconductor ETF (SOXX) also lost more than 5% at close. 

However, software stocks climbed higher on the idea of slowed AI development, reversing recent AI-related disruptions. Salesforce Inc. (CRM) added more than 4% at close, while Palo Alto Networks Inc. (PANW) and CrowdStrike Holdings Inc. (CRWD) soared more than 13% each. The iShares Expanded Tech-Software Sector ETF (IGV) added about 5% at close on Monday. 

Ryan Detrick, Chief Market Strategist at Carson Group, noted in a post on X, “Software was up 5% today and semis were down 5%. Going back 25 years, this was the best day software has ever had relative to semis. The lifeblood of a bull market is rotation, and we continue to see it.”

Meanwhile, markets are closely watching the Federal Reserve's September policy decision expected later this week. Traders are pricing in a 92.4% chance of a rate hike by a quarter-percentage point in the upcoming meeting, according to data from the CME FedWatch tool. This is considerably higher than the 59.4% chance recorded last week. 

The rise in rate-hike expectations is driven by inflation concerns as oil prices continue to climb amid the conflict in the Middle East, weighing on long-term bond yields as well, with the 10-year yield briefly rising above 5% on Monday. 

At the time of writing, Brent crude futures expiring in November were up more than 1% to trade at $106.95 a barrel, while WTI crude futures expiring in October were trading at $102.71 per barrel, up 1.30%.

Long-term bond yields have also been climbing, even after the U.S. Department of the Treasury said last week it will triple its upcoming debt buyback plan to $6 billion. The U.S. 10-year Treasury yield was trading at 4.998% at the time of writing, while the U.S. 30-year Treasury yield was trading at 5.359%. 

“Hiking would be the cleaner decision based on the data and current market expectations,” Jay Woods, chief market strategist at Freedom Capital Markets, reportedly told CNBC. 

“I believe the market has priced that in and may rally with a hike. No change may cause a negative market reaction as it screams once again the Fed is behind the curve,” he added. 

The Federal Open Market Committee (FOMC) meeting is scheduled for Sept. 15–16. 

Trending Stocks To Watch 

Iovance Biotherapeutics Inc. (IOVA): Shares of the biotechnology company were on the retail radar after it hit a 52-week high on Monday ahead of its presentation at the H.C. Wainwright 28th Annual Global Investment Conference on Tuesday. The company already provided updates on strong commercial momentum for Amtagvi (lifileucel), improving gross margins, and an expanding clinical pipeline during its presentation at the Wells Fargo 21st Annual Healthcare Conference. 

Dave & Buster's Entertainment (PLAY): Shares of the restaurant and entertainment chain plummeted more than 12% in the overnight session late Monday after it reported a surprise second-quarter (Q2) loss. 

The Elmet Group (ELMT): The critical metals company soared nearly 33% at close on Monday after it announced that it will receive a $450 million committed investment from the U.S. Department of War for its mining and processing operations.

Roblox Corp. (RBLX): The American video game developer and technology company’s shares climbed nearly 13% at close on Monday amid a series of price target updates after its Roblox Developers Conference (RDC), where the company outlined plans for its game discovery, creator tools and players’ access.

Other Market Trends 

Among ETFs tracking benchmark indexes, the SPDR S&P 500 ETF (SPY) was trading flat at the time of writing. The SPDR Dow Jones Industrial Average ETF Trust (DIA) was trending lower and Invesco QQQ Trust (QQQ) climbed higher in the overnight session.

The iShares 20+ Year Treasury Bond ETF (TLT) was down 0.18% amid ‘bearish’ sentiment. Spot gold prices climbed to $4,310.99 an ounce. 

Asian markets opened mixed on Tuesday. South Korea's KOSPI, Japan’s Nikkei 225 and China’s SSE Composite were trading higher at the time of writing, while Australian stocks edged lower.

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