Stocks now have serious competition from government bonds. When investors can earn roughly 5% from Treasuries, expensive shares become harder to justify. The stock market's arithmetic has acquired a rather stern new accountant.

That pressure was visible before the opening bell. Dow futures fell between 0.3% and 0.5% as the morning progressed, while S&P 500 futures lost roughly 0.2% to 0.4% and Nasdaq futures declined about 0.1% to 0.3%. These were not dramatic moves, but the reasons behind them were substantial: rising interest rates, oil above $100 a barrel, persistent inflation and fresh doubts about the durability of the artificial-intelligence boom.

Alphabet and Microsoft each dropped about 1% in premarket trading. Chipmakers, after leading Monday's selloff, moved with a narrow range, while Nvidia managed a small gain. Worries about AI stocks intensified after tech executives called for a slowdown in advanced AI development over safety concerns: chief among them, the small matter of AI potentially wiping out humanity. Just that.

Donald Trump dismissed warnings of an AI takeover as a hoax, filing them neatly in the "things that won't happen" box. Instead, he argued that AI and data centers could become a greater engine of economic growth than oil, gold, diamonds or even the internet. The only thing required is a smart president. Fortunately, he says, that part is already sorted.

However, many analysts believe a correction in the sector could be due and may be uncomfortable, but it probably won't turn into a broader market crisis.

The more immediate threat comes from energy. The continuing conflict in the Middle East has kept fears of a supply disruption alive. Brent crude traded between roughly $106 and $107.36 a barrel in Tuesday's reports, while West Texas Intermediate climbed above $102 and at one point reached about $103.30. Depending on the morning snapshot, gains ranged from a few tenths of 1% to nearly 2%. Energy is again doing much of the work of pushing inflation higher.

Markets assign a 92.5% probability to a quarter-point interest-rate increase on Wednesday by the Fed. That unusually strong expectation follows an August inflation report showing that consumer prices accelerated and that a closely watched measure of underlying inflation posted its largest rise in four months. Employment remains solid as well, giving the Fed room to tighten policy.

Elsewhere on the market, the strain caused by higher Treasury yields is spreading beyond the largest technology companies. Bitcoin slid nearly 3%, pulling Coinbase and Strategy down more than 3% each. Europe's Stoxx 600, Britain's FTSE 100 and France's CAC 40 each fell 0.6%, while Germany's DAX lost 0.5%. Germany's 10-year bond yield rose about three basis points to 3.565%. 

Today's economic highlights:

Today's agenda includes: the House Price Index, Industrial Production, Retail Sales, and Fixed Asset Investment in China; In the United Kingdom, Employment Change, Unemployment Rate, and Average Earnings including Bonus; In Germany, Wholesale Prices MoM and YoY, followed by the ZEW Economic Sentiment Index; In Italy, the Balance of Trade; In the Euro Area, the ZEW Economic Sentiment Index and Balance of Trade; In the United States, the NY Empire State Manufacturing Index and API Crude Oil Stock Change. See the full calendar here.

  • Dollar index: 99.345
  • Gold: $4,281
  • Crude Oil (BRENT): $107.39 (WTI) $102.45
  • United States 10 years: 5.02%
  • BITCOIN: $77,072

In corporate news:

  • Boeing wins a $552 million contract amendment with the Navy for the Stingray aircraft.
  • Indian consumer regulator escalates probe into Apple's software warranty terms.
  • Amazon Now tops $1 billion in annualized sales in India and targets 100 cities by Diwali.
  • Micron Taiwan union presses profit-sharing demand and keeps strike preparations alive.
  • ExxonMobil describes Middle East LNG supply shortfalls as temporary.
  • Johnson & Johnson reports low rates of key adverse events in a subcutaneous cancer treatment trial.
  • Lockheed Martin has been awarded a USD 1.21 billion contract by the U.S. Army.
  • Accenture will pay USD 25 million to settle U.S. government allegations regarding its DEI programs.
  • Revolution Medicines has received Breakthrough Therapy designation from the FDA for Rasonque in pancreatic cancer.
  • Sysco plans a 1 billion dollar capital increase.
  • Contineum failed to meet the primary endpoint of its Phase IIb trial for depression.

Analyst Recommendations:

  • Abercrombie & Fitch Co.: Baptista Research downgrades to hold from buy with a price target raised from USD 108.90 to USD 163.40.
  • Aptiv Plc: JP Morgan downgrades to neutral from overweight with a price target reduced from USD 65 to USD 56.
  • Coinbase Global, Inc.: Zacks maintains a neutral recommendation with a price target raised from USD 25 to USD 184.
  • Eli Lilly And Company: Berenberg upgrades to buy from hold with a price target raised from USD 1,220 to USD 1,400.
  • Etsy, Inc.: Oppenheimer upgrades to outperform from market perform with a target price of USD 90.
  • Lear Corporation: JP Morgan downgrades to neutral from overweight with a price target reduced from USD 175 to USD 150.
  • Lennox International Inc.: Deutsche Bank downgrades to hold from buy with a price target reduced from USD 609 to USD 444.
  • Philip Morris International, Inc.: William O'Neil & Co Incorporated upgrades to buy from coverage suspended.
  • Resmed, Inc.: RBC Capital Markets upgrades to outperform from sector perform with a price target raised from USD 244 to USD 262.
  • Strategy Inc: Barclays maintains its overweight recommendation with a price target raised from USD 125 to USD 160.
  • The Middleby Corporation: JP Morgan upgrades to overweight from neutral with a price target raised from USD 141 to USD 147.
  • Ulta Beauty, Inc.: Wells Fargo upgrades to market perform from underperform with a price target raised from USD 450 to USD 525.