Wall Street reached new heights on Wednesday, driven by a surprisingly positive inflation report and an optimistic growth forecast from Oracle, fueled by the surge in artificial intelligence (AI) demand. The Standard & Poor’s 500 index climbed 0.3%, achieving a record high for the second consecutive day. In contrast, the Dow Jones industrial average fell by 220 points, or 0.5%, while the Nasdaq composite saw a marginal increase of less than 0.1%, both indexes having set records just a day prior.
Investors are banking on the economy achieving a fine balance: slowing down enough to encourage the Federal Reserve to lower interest rates without triggering a recession, while keeping inflation in check. A new report revealed an unexpected deceleration in wholesale inflation for August, offering a reassuring sign after months of concern about inflation exceeding the Fed’s 2% target, affected by ongoing tariffs. A pivotal report is anticipated on Thursday, which will provide insights into inflation’s impact on U.S. households. Wednesday’s update, however, was viewed positively by analysts. “It essentially rolled out the red carpet for a Fed rate cut next week,” stated Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley.
Traders were already leaning towards the expectation of the Fed’s first interest rate cut of the year in its upcoming meeting, hinging on inflation data remaining mild enough to support that outlook. Higher interest rate cuts could boost inflation along with stimulating the economy, but high inflation readings could complicate the Fed’s decision-making process. “The broader narrative is increasingly anchored on expectations that the Fed will deliver a rate cut at next week’s meeting,” noted Ahmad Assiri, a research strategist at Pepperstone.
Tech stocks were the frontrunners on Wall Street following Oracle’s announcement about its anticipated revenue growth due to AI-related demand. The company’s CEO, Safra Catz, highlighted that Oracle signed four multibillion-dollar contracts in the latest quarter, forecasting a 77% surge in cloud infrastructure revenue to $18 billion this fiscal year, with projections of reaching $144 billion in four years. “AI Changes Everything,” asserted Oracle Chair Larry Ellison. This upbeat announcement propelled Oracle’s stock to soar by 35.9%, marking its most significant single-day gain since 1992, despite having reported quarterly results slightly below analysts’ expectations.
In addition, Taiwan Semiconductor Manufacturing Co., a major chip supplier for AI applications, saw its U.S.-traded stock rise 3.8% after reporting a nearly 34% revenue increase in August compared to the previous year. Klarna, a Swedish “buy now, pay later” service provider, experienced a significant gain of 14.6% in its first day as a publicly traded company on the New York Stock Exchange.
Conversely, Novo Nordisk’s U.S.-traded stock nudged up by 0.1% after the company announced plans to cut 9,000 jobs to manage costs, primarily in Denmark, amid intensifying competition in the weight-loss drug market linked to its Wegovy product. On the downside, Apple’s stock fell by 3.2%, contributing significantly to the Dow’s decline and becoming the heaviest burden on the S&P 500. Analysts remarked that Apple’s recent iPhone unveiling lacked surprises and might not drive substantial demand growth. Moreover, Synopsys’s stock plummeted by 35.8% after the company reported profits that failed to meet analysts’ expectations.
By the end of the trading session, the S&P 500 rose by 19.43 points, closing at 6,532.04. The Dow Jones industrial average fell by 220.42 points, settling at 45,490.92, while the Nasdaq composite increased by 6.57 points to finish at 21,886.06.
In international markets, European indexes showed mixed results after a generally positive session across Asia, with South Korea’s Kospi rising by 1.7% and Hong Kong’s Hang Seng climbing by 1%. In the bond market, the yield on the 10-year Treasury note decreased to 4.04% from 4.08% following the encouraging wholesale inflation report, which bolstered expectations for forthcoming interest rate cuts.
