The Dow Jones Industrial Average surged more than 600 points on Thursday, hitting a fresh record high as investors rushed out of high-flying AI stocks and repositioned into sectors tied to U.S. economic growth.
The rally came one day after the Federal Reserve delivered its third consecutive rate cut, lowering the benchmark range to 3.50%–3.75%, and signaling no further hikes ahead. While lower rates typically boost equities across the board, Thursday’s action showed a dramatic split between the Dow and tech-heavy indexes.
Tech Stocks Slide as Oracle Sparks AI Trade Anxiety
The shift began after Oracle shares plunged 13%, with the cloud giant reporting weaker-than-expected revenue and raising its AI infrastructure spending forecast. The move reignited concerns about whether massive AI investments—now in the trillions—will deliver returns in the near term.
Stocks tied to AI demand, including Nvidia, AMD, Broadcom and CoreWeave, all slipped around 2% as sentiment turned cautious.
“Oracle is acting like the canary in the coal mine for the AI trade,” said Steve Sosnick, chief strategist at Interactive Brokers. “The market is right to rotate away a little.”
Cyclical and Financial Stocks Lift the Dow
While tech dragged the Nasdaq and S&P 500 lower, traditional economy names powered the Dow higher:
- Visa jumped 5% after an upgrade from Bank of America
- Home Depot and other cyclical stocks posted strong gains
- Small-cap stocks in the Russell 2000 hit an intraday record, benefiting from lower borrowing costs
By midday, nearly 61% of U.S. stocks were in the green, a sign of strong market breadth even as mega-cap tech faltered.
Analysts Expect a Santa Rally — but Caution Ahead
Market strategists say the rotation could set the stage for a broad year-end rally, possibly pushing the S&P 500 above 7,000. But they warn that 2026 may bring new challenges, including:
- AI investment headwinds
- A new Federal Reserve chair
- U.S. midterm elections
“If the steam comes out of the AI trade, everything else has to pick up the slack,” Sosnick noted.
Oracle’s Earnings Leave Wall Street Puzzled
Oracle’s quarter delivered multiple red flags:
- Revenue: $16.06B vs. $16.21B expected
- Software revenue: $5.88B vs. $6.06B expected
- Free cash flow: –$10B, nearly double analyst expectations
Major banks responded by cutting price targets and warning of a prolonged cloud over the stock.
S&P 500: 45 New 52-Week Highs
Despite tech weakness, 45 S&P 500 stocks hit new 52-week highs, including:
- General Motors
- TJX Companies
- Caterpillar
- Johnson & Johnson
- Delta Air Lines
Only T-Mobile and Trade Desk hit new 52-week lows.
