Why are Stocks Down Today?

TLDR

• Stock futures dropped Thursday with Nasdaq futures falling 1.2% and S&P 500 futures down 0.8%
• Oracle shares plunged over 10% after missing quarterly revenue targets and increasing spending plans
• Federal Reserve cut interest rates by 0.25% to 3.5-3.75% on Wednesday in split 9-3 vote
• Fed projects only one additional rate cut in 2025, slower easing than markets expected
• Broadcom, Costco, and Lululemon set to report quarterly earnings Thursday

US stock futures fell Thursday morning as disappointing results from Oracle overshadowed the Federal Reserve’s latest interest rate cut. Nasdaq 100 futures led the decline with a 1.2% drop while S&P 500 futures decreased 0.8%.

E-Mini S&P 500 Dec 25 (ES=F)

Dow Jones Industrial Average futures showed more resilience, falling just 0.4%. The smaller decline reflected the index’s lower exposure to technology stocks compared to other major benchmarks.

Oracle Revenue Miss Sparks Tech Selloff

Oracle stock collapsed more than 10% in after-hours trading following its quarterly earnings report. The enterprise software company’s revenue came in below Wall Street forecasts for the period.

The company also raised its capital spending forecast. This increase raised concerns among investors about returns on AI infrastructure investments.

Oracle’s mounting debt levels troubled analysts. The company’s dependence on its OpenAI partnership to achieve revenue goals added to Wall Street’s worries about the stock.

Ryan Lee from Direxion said capital spending keeps climbing above Street expectations for major tech firms. This pattern is creating pressure across the technology sector.

AI-related stocks fell in sympathy with Oracle’s decline. The weakness spread through semiconductor and cloud computing shares in pre-market trading.

Fed Delivers Rate Cut With Cautious Outlook

The Federal Reserve cut its benchmark interest rate Wednesday by a quarter percentage point. The new federal funds rate range sits at 3.5% to 3.75%, the lowest level in three years.

The rate decision passed with a 9-3 vote. This marked the first time since 2019 that three Fed officials cast dissenting votes on a rate decision.

Two policymakers wanted to hold rates steady. One official preferred a larger half-point reduction instead of the quarter-point move.

Fed Chair Jerome Powell described downside risks to the labor market. Many investors interpreted his comments as a dovish signal supporting further rate cuts.

However, Fed officials’ economic projections showed only one more rate cut penciled in for 2025. This slower pace disappointed some market participants expecting more aggressive easing.

Powell eliminated the possibility of a January rate hike. He emphasized the strength of the US economy in his post-meeting press conference.

The Fed chair acknowledged that tariffs under President Trump have added to inflation pressures. This factor could affect the central bank’s future policy decisions.

Chris Kampitsis from Barnum Financial Group said the rate cut was less hawkish than expected. He noted the likely direction for rates remains downward from current levels.

The 10-year Treasury yield stood at 4.138% Thursday morning. This represented a small decline from Wednesday’s closing level.

Markets rallied Wednesday after the Fed announcement. The Dow Jones posted a 1% gain, its strongest Fed-decision day since 2023.

The S&P 500 came close to setting a record high Wednesday. The Nasdaq also climbed before Thursday’s pre-market reversal.

Thursday’s economic calendar features weekly jobless claims. Delayed wholesale inventories and trade sales data will also be released.

Broadcom, Costco, and Lululemon report quarterly results Thursday. These earnings will cap an unpredictable reporting season for AI and retail stocks.

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