Stock futures were down sharply on Monday on concern about an artificial intelligence stock bubble popping because of the emergence of Chinese startup DeepSeek that possibly made a competitive AI model for a fraction of the cost.
Futures tied to the Dow Jones Industrial Average dropped 430 points, or 1%, while S&P futures shed 2.3%. Nasdaq 100 futures slid 4.5% amid a big decline in technology shares.
On top of that, the Federal Reserve will hold its first policy meeting of the year, deciding on the level of interest rates on Wednesday. Fed funds futures are pricing in a more than 99% chance that the central bank leaves interest rates unchanged, according to CMEGroup’s FedWatch Tool.
Renewed inflation fears have emerged recently from the latest economic data. The U.S. Consumer Price Index (CPI) rose by 0.4% in December 2024 and showed a 2.9% increase over the preceding 12 months. The core inflation rate, which excludes volatile food and energy prices, saw a rise of 0.2% in December and a 3.2% increase year-over-year. In light of these inflationary pressures, the market is closely monitoring upcoming decisions from the U.S. Federal Reserve as it meets to assess monetary policy.
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