U.S. stocks experienced a downward trend for the third consecutive session on Thursday, influenced heavily by Oracle’s poor performance and unsettling economic indicators that cast doubt on future rate cuts from the Federal Reserve. The three major indexes all closed in the red.
The Dow Jones Industrial Average saw a decline of 0.4%, dropping 173.96 points to finish at 45,947.32 points. The S&P 500 followed suit with a 0.5% decrease, or 33.25 points, closing at 6,604.72 points. Sectors such as healthcare, consumer discretionary, materials, and utilities faced the most significant declines, with the Health Care Select Sector SPDR (XLV) losing 1.7% and the Consumer Discretionary Select Sector SPDR (XLY) falling by 1.4%. In total, ten of the eleven sectors within the benchmark index ended in negative territory.
The tech-heavy Nasdaq also faced challenges, falling 0.5% or 113.16 points to finish at 22,384.70. The CBOE Volatility Index (VIX), a barometer for market anxiety, increased by 3.64%, rising to 16.74. On the New York Stock Exchange (NYSE), decliners outnumbered advancers by an alarming ratio of 3.11-to-1. The Nasdaq echoed this trend with a 3-to-1 ratio favoring declining issues. Overall trading volume reached 19.58 billion shares, surpassing the 17.99 billion average of the past 20 sessions.
Concerns have mounted regarding the valuation of companies heavily invested in artificial intelligence (AI). While tech stocks, particularly those focused on AI, have driven market rallies over the last couple of years, investors are starting to question the sustainability of their inflated valuations. Companies that have successfully integrated AI into their products have seen share prices surge more than 250% over the past three years. Yet, recent developments, particularly relating to Oracle’s performance, have shaken investor confidence.
Oracle’s shares plummeted 5.6% on Thursday, marking its third straight session of declines and reflecting a significant loss of over 16% from its recent peak. Tesla, another tech giant, also saw its shares fall by 4.4%. Oracle holds a Zacks Rank #3 (Hold), indicating a more cautious approach to investment in the company.
The Federal Reserve had recently cut interest rates by 25 basis points, citing concerns about a shrinking labor market, while signaling the potential for two additional quarter-point cuts this year. However, they maintain a hawkish stance, suggesting a need to balance inflation concerns before making further cuts. Chicago Fed President Austan Goolsbee echoed this sentiment, advising caution regarding any rush to implement further rate reductions.
In the realm of economic indicators, the Labor Department reported a decrease in jobless claims, which fell by 14,000 to 218,000 for the week ending September 20. The four-week moving average also saw a slight decline. Conversely, existing home sales recorded a minor dip of 0.2% month over month, remaining steady at 4 million units on a seasonally adjusted basis but reflecting a year-over-year increase of 1.8%. Furthermore, a revised estimate showed that U.S. GDP grew by 3.8% in the second quarter of 2025, rebounding after a prior decline.
As the market grapples with these dynamics, the outlook remains uncertain, with investors keenly watching for further economic developments and their potential impact on monetary policy.
