US equities pull back
US stock indices fell on Tuesday, on what looked like some mild profit-taking across the board. The small cap Russell 2000 bore the brunt of the selling pressure and closed down 1.1%. The NASDAQ lost 0.7% while the Dow and S&P 500 fell 0.2% and 0.4% respectively. The pullback was triggered by a sudden selloff in Oracle.
Source: TN Trader
A news outlet reported that the company was making lower-than-expected profit margins in its cloud computing division and was reportedly losing money on certain Nvidia chip rental deals. Bear in mind that the stock surged 43% a month ago.
This happened after Oracle announced a deal with OpenAI valued at around $300 billion, one of the largest cloud contracts ever signed. Oracle has given back around half of those gains since then, and yesterday’s news reinforces concerns over the solidity of the artificial intelligence trade.
The bulk of the selloff came soon after the US open. But it's worth noting that all the US majors bounced off their lows towards the European close, so overall, the daily losses were modest. This seems to have boosted sentiment with US stock index futures firmer across the board this morning. This is despite the government shutdown now entering its eighth day. Traders seem to consider the shutdown no more than a mild inconvenience due to the postponement of certain economic data releases.
Instead, investors continue to expect more upside in US equities, supported by ongoing investment in artificial intelligence (AI), along with the prospect of 50 basis-points-worth of rate cuts before the year-end. Tariff-related concerns have been shoved into the long-term car park for now.
There’s little in the way of economic data releases due out today. But there are plenty of Fed speakers, along with the publication of the minutes from the FOMC’s last monetary policy meeting last month.