CNBC Daily Open: AI rally defies bond market rout

The AI bulls are trampling the bond market canaries in the coal mine.

Stock markets are soaring to fresh record highs, even as the bond market sounds the alarm on fiscal constraints.

It’s a complex mix for investors to navigate, but more clues will come today with the release of Fed minutes which are expected to shed some light on that controversial September hike.

Read on for more.

The move comes as Treasury yields retreated from their highs but remain at elevated levels.

For a deeper look at the S&P’s defiant trip higher, you can read more here.

Temasek, Singapore’s state-owned investment giant, has cautioned that a reversal in the AI trade poses the biggest risk to markets right now. Chief Investment Officer Rohit Sipahimalani told the Milken Asia Summit that “AI is such a fast-changing environment that things could change quite easily, and you have to be able to pivot.”

Meanwhile, former BitMEX CEO Arthur Haynes has warned that trillions are being “wasted” on the AI boom.

“If you study financial history and you study every single major technological rollout, it always is overbuilt. There always is a crash, and there always is a bailout,” Hayes said.

Later on Wednesday, investors will be closely watching the release of the minutes from the Federal Reserve‘s last meeting in September. It marked the first hike since 2023 and came despite political pressure from the White House to do the opposite.

The chance of a hike of at least 25 basis points in October stands at 20.5%, from about 51% a week ago, according to CME FedWatch, but markets are pricing in an 84.5% chance of a hike at the December meeting.

The Reserve Bank of India has raised interest rates for the first time since 2023, joining the tightening cycle.

Inflation in India has been rising for 10 straight months, while economic growth has remained strong despite external challenges.

Oil is driving higher in early trade amid further attacks by Yemen’s Iran-backed Houtis on Saudi Arabia oil infrastructure.

Iran’s move to step up attacks on tankers that are transiting through the Strait of Hormuz has also led to renewed worries over oil supplies among traders.

“Squawk Box Europe” will speak exclusively to the CEO of Chevron, Mike Wirth, about how supply disruptions are playing out at the pump. Catch that interview here.

— Leonie Kidd