US stock markets experienced a downturn on Wednesday, as investors grappled with the implications of recent economic data and comments from the Federal Reserve regarding potential interest rate cuts. The technology sector faced particular strain, notably exemplified by Oracle’s notable stock decline.
The Nasdaq Composite index fell more than 1%, while the S&P 500 recorded a decrease of about 0.8%. Both indexes had briefly opened higher but quickly reversed course amid renewed tech weakness. The Dow Jones Industrial Average also saw a decline, dropping 0.3%, following a mixed close in the previous trading session.
In the backdrop of recent economic data, investors are keenly awaiting a clearer signal from the upcoming November jobs report which could indicate the trajectory of interest rates for the next year. Thursday’s consumer inflation update is also anticipated to shed light on inflationary trends.
Federal Reserve Governor Chris Waller indicated that there is still room for interest rate cuts, suggesting a potential reduction of “50 to 100 basis points.” Additionally, New York Fed President John Williams was poised to speak at a different event, further captivating market attention.
Tech stocks were particularly impacted by concerns surrounding investment in artificial intelligence (AI). A Financial Times report revealed that Oracle’s ambitious $10 billion data center project had lost financial support from Blue Owl Capital. This development raised questions about the increasing reliance on debt for funding tech infrastructure, amid persistent doubts concerning the actual demand for AI technologies. Oracle shares plummeted nearly 6% on the news.
The market’s focus also shifted to Micron Technology, which is set to report its quarterly results after the closing bell. Investors are eager for insights into AI semiconductor demand, particularly since Micron supplies chips used in Nvidia’s server systems.
In other corporate news, Netflix shares rallied after Warner Bros. Discovery’s board urged shareholders to reject a competing $108.4 billion bid from Paramount Skydance, citing funding concerns. This news contributed to modest declines in shares of both Warner Bros. Discovery and Paramount.
The tech-heavy Nasdaq saw a further drop as various AI chip stocks faltered. Companies such as Broadcom, Nvidia, and ASML faced declines, reflecting broader market anxieties regarding the tech sector’s performance and investment sustainability.
In an unexpected corporate move, Medline, a medical supply company, announced it raised $6.26 billion through its IPO, marking it as the largest IPO of the year. The company’s valuation surpassed $50 billion, positioning Medline within a robust IPO market as it anticipates future growth.
Oracle continued facing scrutiny after revealing in its SEC filing that it had significant off-balance-sheet lease obligations amounting to $248 billion. This revelation, along with a disappointing earnings report, exacerbated investor concerns around its rising debt levels and dependence on partnerships with AI companies like OpenAI.
Despite the negative momentum, stocks had surged briefly at the open, alongside a surge in oil prices. General Mills also saw a slight increase following its earnings report, which showed better-than-expected revenue despite a mild earnings miss. The company reaffirmed its growth expectations for the fiscal year.
Additionally, discussions surrounding a potential $10 billion investment from Amazon in OpenAI created a buzz, signaling ongoing interest in AI technologies.
Overall, as the market navigates through these uncertainties, investors remain cautious while closely monitoring economic indicators and corporate earnings.
