Major stock indexes were mixed yesterday, with technology-related shares down after cloud computing giant Oracle sounded a warning for artificial intelligence profitability, while the dollar and US bond yields extended declines from the day before, when the Federal Reserve cut interest rates but gave a less hawkish outlook than expected.
The Nasdaq slipped to a one-week low early. The S&P 500 was slightly lower, while the Dow was up sharply, adding to Wednesday’s gains following the Fed rate cut. A global stock index was also higher. Oracle reignited jitters over stratospheric tech valuations by missing analysts’ sales and profit estimates and flagging a $15 billion AI overspend. Its shares were last down 13.1 per cent and the S&P 500 tech sector was down more than 1pc. Shares of Al leader Nvidia were down 3.4pc.
Broadcom shares were down 4.4pc, and all eyes will be on its quarterly results, due after the closing bell.
Earlier, Japan’s Nikkei had lost almost 1pc overnight too as SoftBank – a partner with Oracle on the US Stargate data centre project – slumped more than 7.5pc.
“We have Broadcom earnings after the close, so AI is going to remain in focus for the next 24 hours or so,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.
“Overall, the market is holding up fairly well considering how Oracle is trading and the fact that the AI space is weaker, but I think investors are a little bit cautious,” he said.
Investors were otherwise still focusing on the global interest rate outlook after the Fed lowered its benchmark funds rate, as expected, by 25 basis points to 3.5pc-3.75pc in a 9-3 split decision.
Fed Chair Jerome Powell sounded balanced at a Press conference, saying he did not “think a rate hike is anyone’s base case.” That left interest rate futures with at least two rate cuts priced in for next year.
The Dow Jones Industrial Average rose 481.38 points, or 1.00pc, to 48,539.65, the S&P 500 fell 18.98 points, or 0.28pc, to 6,867.70 and the Nasdaq Composite fell 226.80 points, or 0.96pc, to 23,427.35.
MSCI’s gauge of stocks across the globe rose 0.47 points, or 0.05pc, to 1,012.21. The pan-European STOXX 600 index rose 0.7pc. The US dollar slumped, hitting multi-month lows against the euro, Swiss franc, and sterling and extending losses from the previous session.
The Swiss franc drew support from the Swiss National Bank’s decision to hold interest rates steady. The dollar fell 0.7pc versus the franc to 0.7946, after earlier touching its lowest level since mid-November.
The euro was last up 0.4pc at $1.1737 after hitting its highest level since October 3. The dollar index, which measures the greenback against a basket of currencies, fell 0.41pc to 98.18.
US Treasury yields also fell for a second straight session in the wake of the Fed policy statement.
The Fed also said on Wednesday that purchases of short-dated government bonds will begin today, with an initial round totalling around $40 billion in Treasury bills – a move that was earlier and larger than what investors had expected.
The yield on the benchmark US 10-year Treasury note fell 4.8 basis points to 4.116pc and was on track for its biggest two-day drop in two months. The yield snapped a four-session streak of gains on Wednesday, its longest run of gains in five weeks. The 2-year note yield, which typically moves in step with interest rate expectations for the Fed, fell 4.8 basis points to 3.518pc. The euro zone’s benchmark Bund yield hovered near a nine-month high as investors shifted focus to next week’s European Central Bank meeting.
Germany’s 10-year yields, the euro zone’s benchmark, were down 1.5 bps at 2.84pc yesterday. They hit 2.894pc on Wednesday, their highest level since mid-March. The gap between US and German yields dropped to 126.01, its lowest since June 2023.
In commodities, US crude fell 1.78pc to $57.42 a barrel and Brent fell to $61.16 per barrel, down 1.69pc on the day. Spot gold rose 0.55pc to $4,251.08 an ounce.
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