Nasdaq Futures Hit by AI Fears as Brent Tops $110: Markets Wrap

(Bloomberg) — Nasdaq 100 futures dropped 1.2% as concerns resurfaced over whether the vast amounts of investment in artificial intelligence will pay off. Brent rose above $110 a barrel, with the Strait of Hormuz still shut.

S&P 500 contracts fell 0.6%. Tech was on the back foot after the Wall Street Journal reported that OpenAI recently failed to meet its goals for new users and sales. SoftBank Group Corp., a key backer of ChatGPT’s owner, slumped 9.9% in Tokyo. US-based OpenAI partners including Oracle Corp. and CoreWeave Inc. fell in premarket trading. Nvidia Corp. was poised to drop 2.9% from a record high.

Brent advanced for a seventh straight day. The White House said President Donald Trump will address a proposal from Iran to resume oil flows through Hormuz “very soon.” The dollar rose alongside global bond yields.

Tech stocks are under pressure again following the end of an 18-day advance in chipmakers. Resurgent optimism about AI stood behind the charge as the rest of the market lagged due to rising oil prices. Wednesday’s earnings from four hyperscalers will offer the rally another test.

“The single most important line item isn’t revenue or margins; it’s capex,” said Amanda Lyons, IT-sector lead and head of research at Energy Group Capital. “Any hint of slowing spend would be taken negatively for the ecosystem, but a sharp step-up would likely raise questions around returns.”

Europe led global bond losses on worries that rising oil prices will push inflation higher and prompt central banks to tighten monetary policy. Euro-area consumers saw prices soaring 4% over the next 12 months, up from 2.5% in February, according to a European Central Bank survey.

Ahead of this week’s policy meetings by the Federal Reserve, ECB and Bank of England, traders expect officials to keep rates on hold. The outlook gets cloudier for subsequent meetings, with everything hinging on the duration of the Middle East war. Money markets see the ECB and BOE hiking as soon as June, while odds are for the Fed to keep rates on hold for the rest of the year.

“The rising oil price is starting to feature in macro data,” said Anna Macdonald at Hargreaves Lansdown. “The longer the crisis rolls on, the more severe the impacts will be, and the more we expect it will dominate investor attention.”

Earnings Warning

With the earnings season in full swing, reports across the industrial, materials and energy sectors have highlighted headwinds posed by high commodity prices and rising logistics costs. The worries have so far been concealed by the rapid advance in tech stocks, but some investors warn there’s a risk of bitter surprises ahead.

“Rather than oil moves driving sentiment, time could be the more important factor to watch,” said Laura Cooper, head of macro credit at Nuveen. “As the conflict extends and energy prices stay elevated, it will become increasingly complex to disentangle supply shortages and demand destruction as recession risks rise.”

Corporate Highlights:

Spotify Technology SA, the music streaming leader, reported results that underwhelmed Wall Street, forecasting operating income in the current quarter that missed analysts’ estimates. Barclays Plc traders struggled to capitalize on a volatile quarter, with returns falling short of US rivals that benefited from exposure to commodities markets. BP Plc said earnings jumped in the first quarter as the Iran war led to a surge in profits from its oil trading operation and spiraling energy prices. General Motors Co. raised its profit outlook for the year by $500 million, saying its pickups and sport utility vehicles continue to sell even as gasoline prices soar due to the war in Iran. United Parcel Service Inc. left its financial guidance unchanged despite topping Wall Street’s first-quarter sales and profit expectations, underscoring the uncertainty that remains for the courier’s plan to overhaul its delivery network. Coca-Cola Co. posted first-quarter sales that beat Wall Street expectations, buoyed by brisk purchases of smaller sizes and price increases.

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.6% as of 7:41 a.m. New York time Nasdaq 100 futures fell 1.2% Futures on the Dow Jones Industrial Average rose 0.2% The Stoxx Europe 600 fell 0.5% The MSCI World Index fell 0.2% Currencies

The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.3% to $1.1690 The British pound fell 0.5% to $1.3474 The Japanese yen fell 0.2% to 159.76 per dollar Cryptocurrencies

Bitcoin fell 1% to $76,196.2 Ether fell 0.9% to $2,271.88 Bonds

The yield on 10-year Treasuries advanced three basis points to 4.37% Germany’s 10-year yield advanced five basis points to 3.08% Britain’s 10-year yield advanced five basis points to 5.02% Commodities

West Texas Intermediate crude rose 4.8% to $100.97 a barrel Spot gold fell 2.4% to $4,570.25 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Neil Campling.

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