A look at the day ahead in U.S. and global markets by Amanda Cooper.

To anyone watching the stock market over the last year, it would seem the letters "AI" are akin to a magic wand that will pump up the share price of any company involved in it.

That sprinkle of pixie dust has made chipmaker Nvidia the world's second-most valuable company after Microsoft, which in turn has seen its own shares rise 30% in the last 12 months, leaving Apple in the number three spot.

So when loyal fans - and tech analysts - around the world gathered to watch Apple's annual Worldwide Developers Conference (WWDC 2024) on Monday, it was with the expectation of seeing a dazzling array of AI features that would put the iPhone maker in good standing to compete in this area with market-leader Microsoft.

In a nearly two-hour long presentation, CEO Tim Cook, along with a string of other execs, unveiled how the new "Apple Intelligence" technology will be folded into the existing suite of apps including Siri, along with OpenAI's chatbot ChatGPT.

Wall Street offered a tepid response. Shares in Apple fell around 2% in regular trading and are drifting in this morning's premarket, down around 0.5%.

Tesla boss Elon Musk said on X he would immediately ban Apple devices at his companies if the iPhone maker integrates ChatGPT at the operating system level.

Yet analysts say Monday's event was about more than just folding AI into its devices for Apple - it's also about reversing a decline in sales of its flagship iPhone.

As far as the market is concerned, for once, there are bigger fish to fry than AI mania today. Political turbulence in Europe after right-wing gains in elections and a snap poll in France have injected a degree of uncertainty into stocks, bonds and currencies.

The Federal Reserve releases its decision on interest rates tomorrow, along with updated projections for inflation, monetary policy and growth - the so-called "dot plot".

After Friday's blockbuster jobs report, the focus is squarely on how many rate cuts Fed policymakers believe will be forthcoming this year. Even Siri can't answer that question right now.

Key developments that should provide more direction to U.S. markets later on Tuesday:

* U.S. NFIB Small Business Optimism Survey

* U.S. Treasury 10-year auction

(Reporting by Amanda Cooper; Editing by Christina Fincher)