Fed Hike Leaves US Stock Investors Focused on Rate Path and AI Slowdown

US stock investors are focusing on the trajectory of interest rates, tensions in the Middle East, and the potential slowdown of AI advancement after the Federal Reserve's decision to hike interest rates for the first time in three years.

The rate increase, which was widely expected, left investors uncertain about how many hikes the US central bank might eventually implement and the implications for Treasury yields. According to Art Hogan, chief market strategist at B. Riley Wealth, rising Treasury yields and surging oil prices amid the escalating conflict in the Middle East have been major headwinds for stocks.

Stocks rose on Thursday as oil prices and yields fell, with US crude dropping to $101 a barrel and the 10-year yield falling to 4.93 percent late in the session. This left the benchmark S&P 500 stock index up more than 11 percent for the year and about 2 percent below its mid-August record high.

Investors are now watching for signs of when the Fed might raise rates again, with Fed funds futures suggesting roughly even odds that the central bank hikes at its next meeting in October. In the wake of Wednesday's meeting, a number of Fed policymakers are expected to speak this week, providing insight into the central bank's plans for this hiking cycle.

The tech sector accounts for 38 percent of the S&P 500 and has gained over 20 percent in 2023, but has lost ground since the start of June. Industry leaders have called for a slowdown in AI development following dire warnings about its dangers, which could impact markets, especially technology shares.