[New York Stock Exchange] Mixed on Rate Cut Effect and Disappointing Oracle Earnings... Dow and S&P Hit Record Highs

Tech Stocks Weaken Amid Oracle-Driven AI Overvaluation Concerns
Rotation Accelerates Toward Rate Cut Beneficiaries
Monetary Policy Path Remains Unclear... Volatility Expected to Rise Next Year

The three major indexes on the New York Stock Exchange closed mixed on December 11 (local time). The market saw a clear rotation of funds from technology stocks to beneficiaries of monetary easing, as the effect of the U.S. Federal Reserve's rate cut the previous day coincided with Oracle's weaker-than-expected earnings report. As a result, the Dow Jones Industrial Average and the S&P 500 both reached all-time highs, while the tech-heavy Nasdaq Index underwent a correction.

Reuters Yonhap News

On this day, the blue-chip Dow Jones Industrial Average closed up 646.26 points (1.34%) at 48,704.01, setting a new record high. The large-cap S&P 500 Index rose 14.32 points (0.21%) to close at 6,901.0, also hitting an all-time high. In contrast, the tech-focused Nasdaq Index fell 60.3 points (0.26%) to end at 23,593.855.

By stock, Visa surged 6.11% after Bank of America upgraded its investment rating. Walt Disney rose 2.42% on news of a $1 billion (about 1.47 trillion won) investment and content partnership with OpenAI. Home Depot, a cyclical stock expected to benefit from the rate cut, gained 1.8%, while Caterpillar rose 1.67%. The rotation was also evident among small and mid-cap stocks. The Russell 2000 Index, which tracks small and mid-cap stocks, climbed 30.997 points (1.21%) to 2,590.606, reaching a record high and further fueling the spread of the rate-cut beneficiary theme.

On the other hand, Oracle plunged 10.83%. In its fiscal 2026 second-quarter (September to November) earnings announcement the previous day, revenue and operating profit increased by 14% and 10.5%, respectively, but both slightly missed market expectations. In addition, the company raised its capital expenditure outlook, heightening concerns about the monetization of artificial intelligence (AI) investments. As a result, other technology stocks also showed weak performance. Nvidia fell 1.53%, while Broadcom and AMD dropped 1.53% and 1.6%, respectively.

Steve Sosnick, Chief Strategist at Interactive Brokers, stated, "It is natural for the market to be concerned about Oracle and, more broadly, AI-related investments. Although investments worth trillions of dollars are underway, it is difficult to predict how things will unfold. Oracle is acting as a canary in the coal mine (an early warning signal of risk)."

Susannah Streeter, a strategist at Panmure Liberum, said, "The market is showing a more cautious attitude toward AI-related spending. This is a stark contrast to the middle of 2025, when there was great optimism about signals of increasing capital expenditures." She added, "Since Oracle has mainly financed a significant portion of its investments through debt, it has been one of the weakest links."

The previous day, the Fed held its final Federal Open Market Committee (FOMC) meeting of the year and cut the federal funds rate by 0.25 percentage points to a range of 3.5-3.75% per year. This marked the third consecutive cut following those in September and October. The dot plot, which outlines future rate forecasts, projected one additional cut each in 2026 and 2027. While this led to the assessment of a "hawkish cut" (a rate cut with a preference for monetary tightening), dovish (monetary easing) signals were also detected throughout the FOMC meeting.

Federal Reserve Chair Jerome Powell placed more emphasis on the risk of slowing employment than on inflation, delivering a more dovish message than expected. The Fed's decision to resume short-term Treasury purchases earlier than anticipated, as well as its projection that the core Personal Consumption Expenditures (PCE) inflation rate will fall from 3.0% at the end of this year to 2.5% by the end of 2026, also helped ease market concerns.

As a result, Wall Street is expecting even more accommodative monetary policy than the Fed's projection of one rate cut next year. According to CME FedWatch, the current interest rate futures market is reflecting a 70.2% probability that rates will fall by more than 0.5 percentage points by the end of next year.

However, with internal divisions within the Fed and variables such as the nomination of the next chair remaining, many believe the rate path for next year is still "shrouded in fog." Accordingly, there are also predictions that stock market volatility could increase further next year.

Chris Zaccarelli, Chief Investment Officer (CIO) at Northlight Asset Management, said, "It is not surprising to see short-term optimism in the market as the Fed continues to cut rates despite economic growth. However, if investors realize that rate cuts may take longer than expected or may not materialize at all, this rosy illusion could be shattered."

U.S. Treasury yields are on a downward trend. The 10-year U.S. Treasury yield, the global benchmark for bond yields, fell by 1 basis point (1bp = 0.01 percentage point) from the previous session to 4.15%, while the 2-year U.S. Treasury yield, which is sensitive to monetary policy, dropped 3 basis points to 3.53%.