Dow, S&P 500 Post Record Close; Oracle drags Nasdaq along

The S&P 500 and the Dow Jones hit record highs on Thursday as investors favored financial stocks after a Federal Reserve policy update that was less aggressive than expected, while the tech-heavy Nasdaq Composite underperformed as Oracle’s financial update made investors wary of bets on artificial intelligence. Shares of Oracle tumbled after the company’s quarterly forecasts fell short of analyst estimates and it warned that annual spending would be $15 billion higher than previously planned, fueling fears that its big push into AI cloud computing would burn cash. The cost of insuring Oracle’s debt against default soared as investors fear that Oracle’s heavy reliance on debt financing could fuel an AI bubble similar to the dot-com bust of the early 2000s. While this helped drag other technology names lower, the Dow Jones rose along with the Russell 2000 small-cap index and the S&P 500 value index outperformed the growth index during Thursday’s trading session.

“The name of the game is market rotation. We see small caps, the Dow Jones and cyclicals all outperforming in anticipation of a reacceleration in global growth,” said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments. Investors also continued to digest Wednesday’s update from the U.S. central bank, as the Fed cut borrowing costs by 25 basis points and Chairman Jerome Powell announced a pause on further easing. However, investors were relieved that the Fed still had two rate cuts on its dot plot as it balanced still high inflation with signs of weakness in the labor market.Mark Malek, CIO at Siebert Financial, saw a tailwind in Thursday’s market from the Fed meeting and Powell’s comments.

“It’s clear that the market was tempering itself for a more aggressive cut. Most of us certainly expected Chairman Powell to come out of the gate on a somewhat more negative note,” he said, adding that the Fed’s focus on employment as “something they need to pay close attention to” was notable. To illustrate that point, Thursday’s data from the Labor Department shows that claims for unemployment benefits rose to 236,000 for the week ending Dec. 6, compared with estimates of 220,000.

According to preliminary data, the S&P 500 rose 14.34 points, or 0.21%, to end at 6,902.19, while the Nasdaq Composite lost 60.30 points, or 0.25%, to 23,597.26. The Dow Jones Industrial Average rose 651.37 points, or 1.36%, to 48,709.12.

Communications services and technology stocks fell during the session along with the Philadelphia Semiconductor Index, while the strongest gainers included materials and financials. Shares of Broadcom fell ahead of the closely watched earnings report due after the closing bell.

The blue-chip Dow hit an intraday record with gains in financial stocks.

Visa rose along with other payments companies, and JP Morgan and Goldman Sachs also rose. Shares of Walt Disney rose after the company announced a $1 billion equity investment in OpenAI, with the announcement potentially easing some concerns about the AI ​​space, according to Siebert’s Malek.