The AI trade just got told to slow down 🐢

Welcome back to the Day Trading newsletter 📈

Stocks are starting the week on the back foot: the 10-year Treasury yield pushed above 5% for the first time since 2023, Brent crude is back above $109, and the Fed opens a two-day meeting today with traders pricing roughly 90% odds of a rate hike tomorrow.

And then the people who built the AI boom asked everyone to pump the brakes.

Let’s get into it 👇️ 

📈 The 10-year Treasury yield broke above 5% on Monday for the first time since October 2023, then pushed to 5.041% on Tuesday, its highest since 2007. Hot inflation, $100-plus oil and a federal debt load past $40 trillion are all pushing borrowing costs up ahead of the Fed decision. Barclays called 5% a "historically important inflection point" beyond which higher rates typically become a persistent headwind for stocks.

🛢️ Oil climbed again after Monday's planned Iran-Gulf states talks on reopening the Strait of Hormuz were postponed at the last minute. Oman announced the delay Sunday, with Foreign Minister Badr al-Busaidi saying it was "in the interest of consensus." With Saudi Arabia's East-West bypass pipeline still shut, Brent settled at $105.68 on Monday and traded above $109 on Tuesday. Crude is up roughly 20% this month.

🏦 Bank of America shares fell 5% Monday after CEO Brian Moynihan said third-quarter investment banking fees will drop more than 10% from a year ago. He guided to $1.6 billion to $1.8 billion, down from $2 billion, with trading revenue roughly flat. That's a sharp comedown from a second quarter when fees jumped 50%. Citigroup, by contrast, said later Monday its banking revenue is tracking for low-single-digit growth.

🔐 Anthropic still plans to go public in 2026 despite the safety uproar, and has picked the Nasdaq for its listing. Multiple sources told Axios the calendar hasn't moved; the company may even argue that public-market transparency improves safety, and it still needs the capital. OpenAI, by contrast, is leaning toward a 2027 listing after Sam Altman called an IPO this year "ill-advised."

🔼 A majority of economists and strategists in the latest CNBC Fed Survey now expect at least two rate hikes over the next year, and a third see three or more. Just 46% expected any hike a month ago; that's now 86%. Since then, Chair Kevin Warsh gave a hawkish Jackson Hole speech, oil surged and inflation stayed stuck at 3.4%. Goldman Sachs flipped its call on Sunday and now expects a quarter-point hike Wednesday.

🇨🇳 China's retail sales grew just 0.4% in August from a year earlier, missing forecasts for 0.8% and slowing from July's 0.6%. Industrial output beat at 5.2%, but fixed-asset investment shrank 7.2% year to date and urban unemployment ticked up to 5.3%. Factories are humming while consumers and property sit on their hands, which is why Beijing is warning of a supply-demand imbalance.

💰️ Bitcoin opened Tuesday at $78,181 and slid to around $76,900 by 7:24 a.m. ET as the Fed's two-day meeting got underway. Ether followed, dropping to about $2,480 from a $2,515 open. Crypto has been trading like a rate-sensitive asset all month, and with CME FedWatch showing a 92.5% chance of a hike tomorrow, traders are lightening up ahead of the decision.

💵 Michael Dell's family office and Sequence Holdings are taking insurance broker The Baldwin Group private in a $7.7 billion all-cash deal. Shareholders get $32.50 a share, an 88% premium to where the stock traded before deal reports first surfaced in June. Sequence buys old-line services businesses and retools them with AI, and Baldwin's CEO says the goal is to move faster on exactly that. The deal is expected to close in the first quarter of 2027.

On Saturday, Anthropic CEO Dario Amodei published an essay arguing that AI companies "must slow the pace at which we improve the capabilities of AI models."

OpenAI's Sam Altman and Elon Musk both said they agree. The essay landed after a week of viral safety warnings, including an Anthropic researcher who resigned saying the labs are "gambling with our lives."

By Monday's open, Wall Street was treating it as a demand warning for the entire AI supply chain.

Hewlett Packard Enterprise slid about 11%, Micron, Intel, Marvell and Applied Materials each dropped more than 4%, Nvidia fell about 3%, and SK Hynix lost 7% in U.S. trading.

Dell and Oracle lost 6% and 4% respectively, data-center landlords Equinix and Digital Realty fell more than 3%, and cooling supplier Vertiv dropped about 8%.

The money didn't leave the market; it rotated.

Palo Alto Networks and CrowdStrike, the two biggest pure-play cybersecurity names, each jumped more than 13%, with Okta, Zscaler, SentinelOne and Qualys all posting double-digit gains.

Software names that had been getting crushed on fears AI would eat their lunch, including Salesforce, Adobe and ServiceNow, all rose.

The AI buildout is running at an expected $1 trillion-plus per year in infrastructure spending, and that spending is the backbone of U.S. earnings growth right now.

As One Point BFG's Peter Boockvar put it on CNBC, the economy, the stock market and profit margins "are all in on this capex spend." Anything that threatens the pace of that spend hits chips, servers and data centers first.

Cybersecurity is the flip side: if the industry's answer to safety fears is more monitoring and more guardrails, the companies selling that monitoring win.

The broader indexes held up better than the headlines suggest. The S&P 500 finished down 0.48% and the Nasdaq slipped 0.56%, well off their intraday lows.

What to watch:

• Whether "slower" actually means slower. Amodei said "progress will still seem fast," and Altman clarified Monday that "pacing" does "not mean 'stopping.'" Quilter Cheviot's Ben Barringer argued that even if training slows, inference (the actual running of AI models) is still supply-constrained, so chip revenue is unlikely to take a hit.

• Washington isn't on board either: President Trump lashed out at Amodei on social media Monday, arguing a slowdown would hand China the edge ("WHOEVER WINS AI, WINS!"), and Amodei himself has admitted China is the "toughest dilemma" for his proposal. Early Tuesday, AMD, Qualcomm and Coherent were already bouncing.

• The bigger tell comes this fall, when Anthropic is still expected to list on the Nasdaq. If investors line up for an IPO from the company that asked the industry to slow down, the AI trade is fine. If they don't, Monday was a preview.
  

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⚠️ Disclaimer: Not financial advice. Do your research before making any trades.