Wall Street hits record highs, Oracle shares tumble

The S&P 500 and Dow posted higher closes overnight following a less hawkish than expected policy update from the Fed.

This comes as the tech-heavy Nasdaq underperformed as Oracle’s financial update made investors wary of AI bets.

Oracle shares fell 10.8 percent, their biggest one-day drop since late January, and were among the biggest decliners on the S&P 500 after the company’s quarterly forecasts fell short of analyst forecasts. It also warned that annual spending would be $15 billion more than previously planned, raising fears about the big push into artificial intelligence.

The cost of insuring Oracle’s debt against default has soared as investors fear the company’s heavy reliance on debt financing could be part of an AI bubble similar to the dotcom crash of the early 2000s.

While Oracle helped other tech names slide, the Dow rebounded along with the Russell 2000 small-cap index, which closed up 1.2 percent, and the S&P 500 value index rose 0.6 percent, outperforming the growth index, which gained 0.12 percent.

“Market rotation is the name of the game. We’re seeing small caps, the Dow and cyclical markets start to outperform on the expectation that global growth will pick up again,” said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments.

Investors also continued to digest the U.S. central bank’s update on Wednesday, when the Fed cut borrowing costs by 25 basis points and Chairman Jerome Powell signaled a pause on further easing.

But investors were relieved that the Fed was still cutting rates slightly on the dot chart as it balanced still-high inflation with signs of weakness in the labor market.

Siebert Financial CIO Mark Malek said the continuation of the Fed meeting and Powell’s comments brought headwinds on Thursday.

“Frankly, the market was preparing for a more hawkish rate cut. Most of us were certainly expecting Chairman Powell to come out with a slightly more negative tone,” he said, adding that the Fed’s focus on employment was “something they need to watch carefully.”

As if to illustrate the point, Thursday’s data from the Labor Department showed that unemployment claims rose to 236,000 in the week ending Dec. 6, compared to estimates of 220,000.

The Dow Jones Industrial Average rose 646.26 points, or 1.34 percent, to 48,704.01 points, surpassing the Nov. 12 closing record. The S&P 500 rose 14.32 points, or 0.21 percent, to 6,901.00 points, breaking the record close set on October 28. Nasdaq Composite lost 60.30 points, or 0.25 percent, to 23,593.86 points.

Communications services and technology stocks were the biggest losers among the S&P 500’s 11 major industrial sectors, falling one percent and 0.6 percent, respectively. The Philadelphia Semiconductor Index, which is also the center of artificial intelligence trading, closed with a 0.8 percent decrease.

The strongest gains in the sector were materials, up 2.2 percent, and financials, up 1.8 percent, the S&P 500’s biggest index point gain.

Broadcom shares fell 1.6 percent in the regular session but rose 4 percent in late trading after the company forecast revenue of about $19.1 billion for the current quarter, compared to Wall Street expectations of $18.27 billion, according to data compiled by LSEG.

The blue-chip Dow also included many financial stocks among its top gainers. Visa led the way with a 6.1 percent increase, while American Express, JP Morgan and Goldman Sachs were up more than two percent. Walt Disney shares closed up 2.4 percent after the company announced a $1 billion equity investment in OpenAI. The entertainment company’s bet on AI has likely helped ease some concerns about the AI ​​field, according to Siebert’s Malek.

On the NYSE, which saw 673 new highs and 69 new lows, advancing issues outnumbered declining issues by a 2.2-to-1 ratio. On Nasdaq, 2,667 stocks rose and 2,087 stocks fell as advancing issues outnumbered declining ones by a factor of 1.28 to 1.

The S&P 500 recorded 52 new 52-week highs and three new lows, while the Nasdaq Composite posted 185 new highs and 81 new lows.

On U.S. exchanges, 17.05 billion shares changed hands, compared to the 20-day moving average of 17.39 billion.