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On Thursday, Wall Street set records, even in the face of Oracle’s selloff.
The S&P 500 inched up 0.2 per cent, eking past its previous all-time closing high that was set in October. The Dow Jones leaped 646 points, or 1.3 per cent, to top its own record, set last month. The Nasdaq composite lagged behind and slipped 0.3 per cent because of the weakness for AI stocks.
In the US, it’s the latest return to records for the market following what had appeared to be a debilitating set of worries. Some of the most recent concerns involved what the Federal Reserve would do with interest rates and whether all the dollars flowing into AI chips and data centres would produce profits and productivity as prolific as proponents promised.
Such worries sent Wall Street to some of its worst and scariest days last month since its sell-off during April, but it then got several boosts, which helped it to regain its footing. Key among them was a continuing parade of companies that said they were making bigger profits than analysts expected. Stock prices tend to track with corporate profits over the long term.
The Fed also cut its main interest rate on Wednesday for the third time this year and indicated another cut may be coming in 2026. Wall Street loves lower interest rates because they can boost the economy and send prices for investments higher, even if they potentially make inflation worse.
The Fed’s chair, Jerome Powell, did hint that interest rates may be on hold for a while. But he helped soothe nerves when his comments appeared less harsh than some investors had expected in shutting off the possibility of more cuts in 2026.
The Russell 2000 index of the smallest US stocks jumped 1.2 per cent to help lead the market.
Banks and other companies whose profits are closely tied to the strength of the economy also rallied. Gains of 2.5 per cent for Goldman Sachs and 6.1 per cent for Visa were the strongest forces pushing the Dow higher.
The Walt Disney Co. added 2.4 per cent after OpenAI said the entertainment giant is investing $US1 billion ($1.5 billion) in it. It’s part of a three-year agreement that will also allow OpenAI to use more than 200 Disney, Marvel, Pixar and Star Wars characters to generate short, user-prompted social videos.
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But a return to records for the US sharemarket does not mean all worries are gone.
Oracle fell 10.8 per cent and had briefly been on track earlier in the day for its worst loss since 2001, when the dot-com bubble was still deflating.
Doubts remain about whether all the spending that Oracle is doing on AI technology will be worth it. Analysts said they were surprised after Oracle laid out on late Wednesday how much it will spend on investments this fiscal year, and questions continue about how the company will pay for it.
Such doubts are weighing on the AI industry broadly, even as many billions of dollars continue to flow in.
Nvidia, the chip company that’s become the poster child of the AI boom and is raking in close to $US20 billion a month, fell 1.5 per cent on Thursday. It was the heaviest weight on the S&P 500.
With AP, Bloomberg
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