Dow rises 200 pts as AI stocks support sentiment amid Iran, yield concerns

US stocks opened mixed on Wednesday as investors weighed renewed US-Iran tensions, rising global bond yields and continued strength in the artificial intelligence trade.

The Dow Jones and S&P 500 indices edged higher, while the Nasdaq Composite slipped as investors assessed the impact of elevated oil prices on inflation and the Federal Reserve’s policy outlook.

AI stocks support sentiment as markets assess Iran tensions

The Dow Jones Industrial Average was up 215 points while the S&P 500 gained 0.10% and the Nasdaq Composite fell 0.05%.

Renewed US-Iran clashes have pushed geopolitical risks back into focus after several weeks of relative calm. The latest military action has also revived concerns about energy supplies and inflation, particularly as oil prices remain near $90 a barrel.

At the same time, continued optimism around AI infrastructure has provided support for parts of the technology sector.

Dell shares rose 6.65% in trading after the company raised its annual profit and revenue forecasts.

Nvidia shares rose 1.01%, while Apple and Tesla each fell 0.26% and 0.79% in trading respectively.

The mixed performance reflected investor efforts to balance geopolitical and macroeconomic risks against expectations for continued growth in AI-related spending.

Rising bond yields weigh on equities

Higher Treasury yields remained a key concern for stock investors.

The US 10-year Treasury yield briefly reached 4.814% on Wednesday, its highest level since November 2023, before retreating by two basis points.

Bond yields also rose in the UK, Germany and France, while Japan’s 10-year government bond yield remained around multi-decade highs.

Rising yields can put pressure on equity valuations by increasing the discount rate applied to future corporate earnings.

Investors have become increasingly concerned that higher oil prices could add to inflation and complicate the Federal Reserve’s interest-rate decisions.

Markets are now pricing in a 66% probability of a September rate hike, up from about 37% a week earlier, according to the CME FedWatch tool.

The increase followed comments from Federal Reserve Chair Kevin Warsh that placed greater emphasis on controlling inflation.

Global markets retreat as investors await jobs data

Weakness was more pronounced across overseas markets. The pan-European Stoxx 600 fell 0.49%, while the FTSE 100 and CAC 40 were each down about 0.6%.

Germany’s DAX declined 0.7% and Italy’s FTSE MIB fell 0.5%.

Asian markets also moved lower. Japan’s Nikkei 225 dropped 2.85%, South Korea’s Kospi declined 4%, Australia’s S&P/ASX 200 fell 0.97%, and China’s CSI 300 ended 1.38% lower.

Investors are also awaiting Friday’s US jobs report for additional clues about the economy and the Federal Reserve’s next move.

Ahead of that report, ADP said private US employers added 38,000 jobs in August, below the upwardly revised 46,000 jobs added in July and the 47,000 increase expected by economists.

Job gains were concentrated heavily in healthcare and several other industries.

The weaker-than-expected private payrolls figure adds another data point for markets assessing the balance between economic growth, inflation and monetary policy as September trading gets underway.