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Signage for Nvidia Corp. during the Taipei Computex expo in Taipei, Taiwan, on Tuesday, May 30, 2023.

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This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribehere.

Infectious pessimism U.S. stocks fell for a third consecutive day as Treasury yields continued rising to multiyear highs. The pan-European Stoxx 600 slumped 1.3% amid a flurry of central bank decisions. Sweden hiked rates by 25 basis points to 4%; Norway raised its rate from 4% to 4.25%; Switzerland kept rates unchanged. For more central bank decisions, see below.

A halt and a big hikeThe Bank of England elected to keep interest rates unchanged at its September meeting, breaking a series of 14 straight rate hikes. But the decision wasn't unanimous: Four out of nine members voted for another 25-basis-point hike to 5.5%. In other central bank news, Turkey hiked its interest rate to 30%, a 5-percentage-point jump from 25%.

Securing business and the internetCisco is acquiring Splunk, a cybersecurity software company, for $157 a share in a cash deal. The total deal's worth $28 billion about 13% of Cisco's market capitalization making it the company's largest acquisition ever. Cisco's known for making computer networking equipment, but has been boosting its cybersecurity business recently to grow its revenue stream.

SuccessionRupert Murdoch is stepping down as chairman of the board of Fox Corp and News Corp in November. The 92-year-old will be succeeded by his son Lachlan Murdoch. Fox Corp is the parent company of Fox News, a TV channel embroiled in a $787.5 million settlement this year over false claims that Dominion Voting Systems' machines swayed the 2020 U.S. presidential election.

[PRO] 'Uninvestable' banking sectorSteve Eisman, the investor who called and profited from the subprime mortgage crisis that began in 2007, thinks "the whole bank sector is uninvestable." Silicon Valley Bank collapsed in March this year, sparking panic and causing depositors to withdraw money at other regional banks. But that's not the only risk to banks weighing on Eisman's mind.

Four months after hype over artificial intelligence fired up markets, the rally's starting to look more like a hallucination a confident but false claim AI models are prone to making.

For evidence, look no further than Nvidia, the spark that ignited the whole blaze. Shares of the chipmaker peaked on Aug. 24 and have tumbled 18.4% since. While it's true Nvidia's still up 181% for the entire year, that's 60 percentage points lower than its August peak, when shares were 244% higher.

Microsoft's announcement of a broad rollout of Copilot the company's AI tool to corporate clients didn't stoke excitement. On the contrary, Microsoft shares dipped 0.39% after the company's event. By contrast, recall how share prices popped to a record in May after the company announced the pricing of the Copilot subscription service.

And Arm, which tried to position itself as integral to AI computing, saw its shares descend to Earth after rocketing on the first day of its initial public offering. After dropping almost 1% in extended trading, the share's around $51.60 a piece just 60 cents above its IPO price.

In short, investor interest in AI while still hot in comparison with other sectors looks like it's simmering down.

"The combination of waning retail demand and cautious risk sentiment among institutional investors may pose a substantial risk to the AI sector, potentially heralding a pronounced reversal in the weeks ahead," said Vanda Research's senior vice president Marco Iachini.

Blame the usual suspects for this lukewarm sentiment. Higher-for-longer interest rates and Treasury yields caused by spiking oil prices and a tight labor market. (Initial jobless claims for last week dropped to their lowest level since late January, according to the U.S. Labor Department.)

Against that backdrop, it's unsurprising major indexes had a bad day. The Dow Jones Industrial Average fell 1.08%, the Nasdaq Composite slid 1.82% and the S&P 500 lost 1.64%, the most in a day since March. All three indexes are poised for a losing week, with the tech-heavy Nasdaq the deepest in the red so far.

If it's any comfort, September the worst month for stocks, historically ends in a week. Investors will hope it'll pass like a bad dream, or a banished hallucination.

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CNBC Daily Open: Dispelling the AI hallucination - CNBC