US Stocks Drop on More AI Concerns – Nasdaq down 1.4%

US equity markets finished lower overnight, with technology stocks leading the declines as renewed concerns surrounding AI-driven growth weighed on investor sentiment. The Nasdaq fell 1.43% to close at 23,255, while the S&P 500 declined 0.84% to 6,917. The Dow Jones Industrial Average was comparatively more resilient but still ended the session 0.34% lower at 49,240. In currency markets, the US dollar eased 0.28% to 97.35. US Treasury yields edged lower following the previous session's increase, with the 2-year yield declining 0.6 basis points to 3.566% and the 10-year yield falling 1.4 basis points to 4.264%. Commodity markets again saw the big moves, with oil prices advancing amid escalating tensions between the United States and Iran, following reports that the US had shot down an Iranian drone; Brent rose 2.38% to $67.88, while WTI gained 2.66% to $63.79 a barrel. Precious metals surged after the previous sessions' losses, with gold posting its strongest daily performance since 2008, rising 6.12% to $4,946.76, while silver also rebounded sharply, climbing approximately 7.5% by the NY close.

Precious Metals Remain the Main Focus for Traders

Gold and silver remain in focus for traders in the current environment as they continue to remain volatile, with gold experiencing its best day's trading yesterday since 2008, a decent rebound after huge declines on Friday and Monday. Traders are reporting that liquidity is still very thin, and those watching the market closely are seeing percentage moves as any sizeable orders hit the market. One of the main takeaways for experienced traders is that the moves in both gold and silver are still very much flow-driven, and fundamentals are having very little to do with the recent moves. For now, most traders agree that these conditions are likely to persist in the coming days and that investors and traders alike should ensure that their risk and capital management strategies are adjusted accordingly. If they aren't, there could be a lot more pain in the metals markets as this week progresses.

More Volatility Ahead for Traders

Looking ahead, volatility is expected to remain elevated, particularly within commodity markets, with more geopolitical updates expected through the day as well as a relatively full data calendar. We have already seen New Zealand employment data come in above expectations (+0.5% vs +0.3% exp), while the unemployment rate rose (+5.4% vs +5.3% exp), which saw some moves in the Kiwi. The London session will see a focus on the continent, with EU CPI (exp +1.7%) and Core CPI (exp +2.3%) data scheduled, while we will see some US jobs data in the New York session, with the ADP Non-Farm Employment Change (exp +46k) due before the ISM Services PMI (exp 53.5) is released later in the day. We also have confirmation that all Bureau of Labor Statistics data, including Non-Farm Payrolls, will be delayed due to the recent US government shutdown, which will disturb the usual flow of markets in the first week of the month.

Source: IC Markets