US stock futures experienced a downturn on Thursday, primarily influenced by concerns surrounding Oracle Corp.’s recent earnings report. The tech giant’s results raised alarms about excessive spending on artificial intelligence (AI), casting doubt on the sustainability of the recent rally in Wall Street markets sparked by the Federal Reserve’s latest interest rate cut.
Contracts for the S&P 500 and Nasdaq 100 fell by 0.3% and 0.6%, respectively, although the declines were not as severe as earlier in the morning. Conversely, futures for the Dow Jones Industrial Average remained relatively stable, displaying less volatility due to its composition, which features fewer technology companies.
Oracle’s after-hours earnings report revealed a shortfall in cloud sales and an increase in its data center spending by an eye-popping $15 billion. The stock subsequently took a hit, plummeting more than 10%. This downward trend rekindled worries about tech valuations, debt levels, and the likelihood that significant investments in AI might not yield the anticipated returns.
The broader market had previously regained momentum after closing higher on Wednesday, buoyed by the Federal Reserve’s decision to cut rates for the third time this year in a split vote. Fed Chair Jerome Powell noted the economy’s resilience while implying that further rate hikes are unlikely in the immediate future. Powell indicated the Fed is “well positioned to wait and see” how the economic landscape unfolds, highlighting that tariffs from the previous administration have contributed to inflationary pressures.
Market focus remains on an upcoming weekly update concerning jobless claims, as well as delayed data regarding wholesale inventories and trade sales, which may garner heightened attention.
Earnings reports continue to roll in, with firms such as Broadcom, Costco, and Lululemon set to disclose their financial results soon.
In other market movements, shares of Gemini Space Station surged over 15% in premarket trading after receiving approval from the Commodity Futures Trading Commission for its derivatives exchange application. This endorsement will enable the Winklevoss-led company to offer a prediction markets platform, allowing US customers to trade contracts related to various events. The interest in this emerging sector persists, despite ongoing legal uncertainties.
Magnum Ice Cream Company stock rose 5% ahead of its trading debut, while Netflix’s shares jumped more than 1%, reflecting ongoing competition for Warner Bros Discovery. In contrast, Marvell Technologies saw a decline of 2% following concerns about losing orders to tech giants like Microsoft and Amazon Web Services.
Amid these developments, market sentiment faced a sharp shift as Oracle’s weakened performance reignited fears over tech stock valuations, casting doubt on the potential for a holiday season rally. The MSCI All Country World Index, which had approached historic highs, tumbled in reaction to Oracle’s disappointing outlook, while gold also registered a decline.
Investors now find themselves grappling with uncertainty, particularly concerning the potential risks associated with an overreliance on AI amid a backdrop of cautious optimism following the Fed’s previous easing measures.
Furthermore, Novo Nordisk shares have declined dramatically this year, erasing the gains fueled by the initial excitement surrounding weight-loss drugs like Wegovy. The company’s stock has fallen over 50%, and the impending expiration of the semaglutide patent is raising questions about future growth prospects.
Bitcoin also saw a dip, trading below the $90,000 threshold as fears of an AI bubble redirected investor focus toward safer bets. Meanwhile, Cisco systems reached pre-dot-com crash levels for the first time in 25 years, demonstrating the diverse landscape of market movements as traders navigate this turbulent financial climate.
