Indices: Dow up 1.34%, S&P 500 up 0.21%, Nasdaq down 0.25%.
Some tech and AI stocks fall due to Oracle update
Value outweighs growth and small outweighs large.
Dec 11 (Reuters) – The S&P 500 and Dow Jones Industrial Average closed at record highs on Thursday after the Federal Reserve's policy updates were less hawkish than expected, while the tech-heavy Nasdaq underperformed after Oracle's financial update made investors wary of investing in artificial intelligence.
Oracle (ORCL.N)opens a new tab Shares fell 10.8% after the company's quarterly forecast fell short of analysts' expectations, the biggest single-day decline since late January and the top decliner in the S&P 500. The company also warned that annual spending would be $15 billion higher than previously planned, raising concerns about its major push into AI.
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Oracle's default insurance costs rose as investors worried that the company's heavy reliance on debt financing was part of an AI bubble similar to the dot-com bust of the early 2000s.
The Dow rose along with the Russell 2000 (.RUT), although Oracle helped drag down other technology names.opens a new tab Small-cap index rose 1.2%, S&P 500 Value Index (.IVX)opens a new tabup 0.6%, outperforming the growth index (.IGX).opens a new tabfinished at 0.12%.
“The name of the game is market rotation,” said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments. “The name of the game is market rotation. Small-cap stocks, the Dow Jones Industrial Average, and cyclical stocks are all starting to perform better in anticipation of the global economy reaccelerating.”
Investors continued to digest updates from the U.S. central bank after Wednesday, when the Federal Reserve cut borrowing costs by 25 basis points and Chairman Jerome Powell signaled a halt to further easing.
But investors were relieved that the Fed still had some interest rate cuts on the dot plot to balance out persistently high inflation and signs of weakness in the labor market.
Mark Marek, chief information officer at Siebert Financial, said Thursday was buoyed by the Fed's continued progress and comments from Chairman Powell.
“It's clear that the market was bracing for a more hawkish rate cut, and most of us were certainly expecting Powell to come out with a bit more of a negative tone,” he said, adding that it was notable that the Fed was focusing on employment as “something we have to watch closely.”
Illustrating that point, data released Thursday by the Labor Department showed that jobless claims rose to 236,000 for the week ending Dec. 6, compared to an expected 220,000.
Dow Jones Industrial Average (.DJI)opens a new tab It rose 646.26 points (1.34%) to 48,704.01, surpassing the record closing price on November 12th. S&P 500 (.SPX)opens a new tab rose 14.32 points (0.21%) to 6,901.00, breaking the October 28 closing price record. Nasdaq Composite (.IXIC)opens a new tab It decreased by 60.30 points (0.25%) to 23,593.86.
Communication services (.SPLRCL)opens a new tab and Technology Stocks (.SPLRCT)opens a new tab were the biggest decliners among the 11 major S&P 500 industries, dropping 1% and 0.6%, respectively. Philadelphia Semiconductor Index (.SOX)opens a new tab The company, which is also a major player in the AI trade, closed down 0.8%.
The biggest sector gainer was Materials (.SPLRCM).opens a new tabup 2.2% Financials (.SPSY)opens a new tabwhich increased by 1.8% and was the biggest boost in index points for the S&P 500.
Broadcom (AVGO.O)opens a new tab The company's revenue for the quarter was expected to be $18.27 billion, according to data compiled by LSEG.The company's stock fell 1.6% in regular trading but rose 4% in late trading.
Blue-chip stock Dow (.DJI)opens a new tab The top gainers included several financial stocks. Visa VN led the way with a 6.1% rise, while American Express (AXP.N) also rose.opens a new tabJP Morgan (JPM.N)opens a new tab and Goldman Sachs (GS.N)opens a new tab Both rose by more than 2%.
walt disneyopens a new tab Shares closed 2.4% higher after the company announced a $1 billion equity investment in OpenAI. Siebert's Marek said the entertainment company's bet on AI likely helped allay some of the concerns about the field.
Line chart titled “Number of New Unemployment Benefits Filed by Federal Employees”
Advancing issues outnumbered declining issues on the New York Stock Exchange by a 2.2-to-1 ratio, with 673 new highs and 69 new lows. Advancing issues outnumbered declining issues on Nasdaq by a 1.28 to 1 ratio, resulting in 2,667 advancing issues and 2,087 declining issues.
The S&P 500 Index recorded 52 new 52-week highs and 3 new lows, while the Nasdaq Composite Index recorded 185 new highs and 81 new lows.
On U.S. exchanges, 17.05 billion shares were traded, compared to the 20-day moving average of 17.39 billion.
Reporting by Sinéad Carew in New York and Johann M Cherian and Pranav Kashyap in Bangalore. Additional reporting by Purvi Agarwal in Bengaluru. Editing: Shinjini Ganguly and Matthew Lewis
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