Morning in New York: Optimism Drives Market Prices

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Capital Markets Research at Freedom Broker.

At the start of the new week, market participants are expecting tensions between the U.S. and China to ease ahead of the talks between the two countries’ leaders scheduled for September 24. U.S. Treasury Secretary Scott Bessent described his meeting with Chinese Vice Premier He Lifeng as successful. The meeting covered trade relations, access to technology, and a dialogue on artificial intelligence. An important signal came from Washington’s statement regarding the possibility that U.S. pharmaceutical companies would retain the right to license most drugs from Chinese developers. This provided a boost to China’s biopharmaceutical sector. The investment community expects Donald Trump and Xi Jinping to focus on finding compromise solutions during the upcoming summit.

Executives at AI companies are increasingly speaking out about the risks posed by cutting-edge models. As a result, the market fears that current projections regarding demand for accelerators, data centers, and electricity may be overly optimistic. In the coming days, OpenAI CEO Sam Altman will address the UN Security Council. At the same time, Nvidia (NVDA) CEO Jensen Huang and other advocates for the accelerated adoption of AI continue to emphasize the economic and strategic benefits of continuing to make major investments in the sector. Current comments from management do not, in and of themselves, affect the sector’s fundamental valuation: an actual reduction in capital expenditures by major cloud companies, delays in the launch of AI models, or regulatory decisions that limit their development could serve as sustained negative triggers.

Oil prices may remain under pressure in the short term, as physical shipments from the Middle East are so far exceeding the market’s initial expectations, and export flows from the region remain at a relatively high level. However, this optimism remains fragile. Last Saturday, the Houthis claimed to have struck sensitive targets in Riyadh and oil infrastructure at the port of Yanbu, and on Sunday, the U.S. and Iran exchanged new threats. At the same time, U.S. President Donald Trump raised the possibility of a meeting with Iranian President Masoud Pezeshkian, which fuels hopes for a diplomatic resolution to the conflict. Going forward, the market will assess actual export volumes from Saudi Arabia, the likelihood of new attacks on infrastructure, and the accessibility of the Strait of Hormuz and the Bab el-Mandeb Strait for energy transportation. An escalation of tensions in the region could quickly push oil prices above $100.

Today, Ostan Gulsby, President of the Federal Reserve Bank of Chicago, will speak at an OMFIF event in London focused on monetary policy amid high uncertainty. Investors will be watching closely for the speaker’s comments on the Fed’s plans regarding the benchmark interest rate.

The most significant event on the macroeconomic calendar will be the release of the Chicago Fed National Activity Index, which reflects trends in the real sector of the U.S. economy.

U.S. index futures are moving higher. We assess the risk balance for the upcoming session as neutral, with moderate volatility. Successful preliminary talks between Washington and Beijing, as well as signals of possible targeted compromises, are supporting interest in risk assets. An additional positive factor is the potential normalization of oil infrastructure capacity in the Middle East, which has eased concerns about a supply shortage and led to a decline in oil prices.

— Shares of Paramount Skydance (PSKY) and Warner Bros. Discovery (WBD) are up 7.4% and 7.37%, respectively, following reports that Paramount may settle its dispute with California and 11 other states—which are attempting to block the $110 billion acquisition of Warner Bros.—in the coming days. Among the terms under discussion are independent monitoring of CNN content and commitments regarding the number of releases. A settlement would remove one of the last key obstacles to completing the merger.

— Accenture (ACN) shares rose 6% following the announcement of a partnership with Anthropic to evaluate and test cutting-edge AI models. The companies intend to invest at least $1 billion each over the next five years. Through its AI division, Faculty, Accenture plans to test Anthropic’s models for safety, verify their compliance with specified rules, and evaluate their responses to complex or potentially harmful prompts.

— Critical Metals (CRML) shares surged 25% on news of an agreement between the U.S. and Denmark granting the U.S. the right of first refusal to regulate foreign investment in Greenland. Based on this, the market is anticipating government support for developers of rare earth element deposits on the island, including the Tanbreez project, which is linked to Critical Metals.

Trading on September 18 on U.S. stock markets ended with mixed results. The S&P 500 gained 0.17%, the Nasdaq-100 rose 0.67%, the Dow Jones fell 0.18%, and the Russell 2000 dropped 0.5%. The technology sector led the gains, driven primarily by semiconductor manufacturers and suppliers of AI infrastructure equipment.

The main factor holding the market back was the resumption of the rise in U.S. Treasury yields, which had fallen on September 17 following the Fed meeting that concluded the previous day. The yield on 10-year Treasuries rose by 7 basis points to 5.01%. Among the reasons for this, market participants cited the Bank of Japan’s rate hike—which was less aggressive than expected—and related concerns that Japanese investors might reduce their holdings of U.S. government bonds.

During Friday’s trading session, oil prices corrected, as they had two days earlier, amid expectations that the temporary shutdown of the East-West pipeline in Saudi Arabia would have a smaller impact on supply than initially feared. Oil flows from the region remain relatively stable, as Saudi Arabia has increased shipments through the Strait of Hormuz. Risks stem from the potential for delays in restoring operations on the aforementioned pipeline and new attacks on energy infrastructure in the region.

Bitcoin rebounded above $80,000 on Friday and closed near that level. The rally took the form of a short squeeze. After the price failed to hold below that level, the closing of short positions accelerated the upward movement. According to Mitrade data, approximately $603 million worth of positions were liquidated over a 24-hour period, of which about $523 million were short positions. The liquidations affected more than 110,000 traders. This supported the share prices of crypto-related companies such as Coinbase Global (COIN), Robinhood Markets (HOOD), and Marathon Digital Holdings (MARA).

Xenon Pharmaceuticals shares (XENE) plummeted 30.7% after the suspension of patient enrollment in trials of azetucalner, a drug intended to treat depression and bipolar disorder, due to undesirable neuropsychiatric side effects. The company has already filed a New Drug Application (NDA) with the FDA for the drug’s use in treating focal seizures and is continuing research in the field of epilepsy therapy. However, the prospects for expanding the drug’s indications in psychiatry are in question.

U.S. automakers sent a letter to Donald Trump urging him to prevent Chinese companies from selling and manufacturing cars in the country ahead of his meeting with Xi Jinping. Top industry executives fear that Washington may ease restrictions on Chinese manufacturers, including BYD, which would significantly intensify competition in the market for electric vehicles and affordable cars with internal combustion engines (ICEs). Against this backdrop, Ford Motor (F) shares fell by about 3%, while General Motors (GM) shares corrected by about 5%.

This article was AI-translated and verified by a human editor