Fed rally fizzles after Oracle misses revenue

General market commentary

US equity markets delivered solid gains on Wednesday after the Federal Reserve cut interest rates and signalled a less hawkish stance than investors had expected. The S&P 500 index rose around 0.8 percent, while the more interest rate sensitive Russell 2000 index outperformed with an advance close to 2 percent. The Dow Jones Industrial Average climbed 1.1 percent and the Nasdaq Composite added 0.3 percent. Government bond markets strengthened, pushing the yield on the ten-year US Treasury note down to just over 4.14 percent, while the dollar weakened by roughly 0.5 percent against a trade weighted basket of international currencies. Lower interest rates also supported gold, which gained nearly 1 percent over the day.

The Federal Reserve’s decision featured notable divisions, with three members dissenting for the first time since 2019, highlighting differing views over the future path of policy. While the central bank signalled a likely pause in January, Chair Jerome Powell suggested further easing was more likely than a return to rate increases. The updated dot plot showed considerable dispersion in forecasts, with the median member expecting only modest reductions in coming years. Inflation concerns persist, despite some cooling in wage pressures, and uncertainty around tariff related price increases remains elevated. Market expectations for further rate cuts in early 2026 increased following the meeting, as Treasury yields fell and interest rate probabilities shifted.

Latest market and economic update

Asian equity markets mostly fell as technology and artificial intelligence related shares dropped after weak Oracle earnings. Japan led losses, while China and Hong Kong also slipped. Some non-tech sectors in Singapore, Australia and India saw small gains. Dovish signals from the US Federal Reserve offered only limited support.

US futures fell sharply overnight as weak Oracle results reignited concerns over artificial intelligence spending, outweighing dovish signals from the Federal Reserve. S&P 500 futures dropped 0.8 percent, the Nasdaq 100 fell 1.2 percent and the Dow slipped 0.4 percent. Oracle slumped about 12 percent after hours, dragging Nvidia and other major tech and AI shares lower.

European shares ended the mid-week session flat as investors awaited the Fed’s likely 25-point rate cut, with Aegon falling 10% on its U.S. relocation, Delivery Hero jumping 13.7%, and renewable firms Nordex, Siemens Energy, and Vestas rising 4–8%. Autos and industrials declined, while ECB’s Lagarde hinted at higher growth and France’s social security budget passed narrowly.

The US dollar edged lower after the Federal Reserve’s 25 basis point rate cut, reflecting cautious investor sentiment amid the Fed’s hawkish signals. Against the euro, the dollar eased slightly, continuing a modest retreat following earlier declines, as markets digested the Fed’s outlook and the potential for only limited further rate cuts in 2026.

Oil prices edged higher after the United States seized a sanctioned tanker near Venezuela, raising concerns about supply disruptions. Brent rose 0.4 percent and WTI gained 0.5 percent. A larger than expected fall in US crude stocks also offered support, while the Federal Reserve’s latest rate cut weakened the dollar and improved commodity demand prospects.

The Federal Reserve cut its benchmark rate by 25 basis points to 3.5–3.75%, the lowest since 2022, with three members dissenting. Officials left future rate projections largely unchanged, signalling one more cut in 2026, and announced they will begin buying about $40 billion of Treasury bills per month as from tomorrow. GDP forecasts were raised, inflation slightly lowered, and unemployment projections remained steady.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Oracle’s fiscal second-quarter revenue missed expectations at $16.06 billion, though adjusted earnings of $2.26 per share beat forecasts. Cloud sales rose 34%, software fell 3%, and remaining performance obligations surged 438%. A $2.7 billion gain from Ampere’s sale boosted results, but shares fell over 11% after hours amid concerns over long-term growth and AI customer prospects.

Meta is shifting to a closed, paid-for AI model called “Avocado,” using tech like Alibaba’s Qwen. The change follows weak results from Llama 4 and rising internal tensions. Zuckerberg is hiring top researchers with big pay offers, but his tight control has frustrated leaders such as Alexandr Wang, and Yann LeCun has left.

Elon Musk and Jeff Bezos are racing to build AI data centres in orbit to meet soaring computing needs. Space offers unlimited solar power and avoids Earth’s land and cooling limits. Challenges remain, but investor interest is rising, boosting space firms like Rocket Lab, AST SpaceMobile, and Redwire as the “Orbital Cloud” race begins.

ByteDance and Alibaba are seeking Nvidia’s powerful H200 AI chip after Trump allowed its export to China, but await Beijing’s approval. H200 is six times stronger than the previous legal chip. Limited supply and regulatory review mean purchases may be cautious, though Chinese firms, universities, and military-linked entities remain keen on acquiring it.

Elon Musk confirmed reports that SpaceX plans a 2026 initial public offering, seeking over $25 billion and a valuation above $1 trillion. The IPO, potentially one of the largest ever, aims to fund Starlink expansion, AI infrastructure in space, and data centres, marking a shift from Musk’s previous reluctance to take the company public.

President Donald Trump said any deal for Warner Bros. Discovery should include CNN or have it sold separately, criticising its leaders. Netflix and David Ellison have competing offers, with Ellison’s including CNN. Trump’s son-in-law is reportedly involved in Ellison’s bid, and the president’s comments could affect the approval of the deal by regulators.

Adobe forecast fiscal 2026 revenue and profit above Wall Street expectations, driven by strong demand for its Creative Cloud tools and growing adoption of generative AI. Monthly active users rose 35 percent to over 70 million. The company also plans to acquire Semrush for $1.9 billion and adjust reporting to focus on subscription and recurring revenue.

AIG shares jumped 6 percent after reports that Chubb made an informal takeover offer, though Chubb denied submitting any bid. Investors reacted positively for AIG, while Chubb’s shares fell 2 percent. Neither company has officially commented. AIG has restructured since the 2008 financial crisis, divesting several business units.

Hims & Hers Health shares fell almost 5 percent after US lawmakers proposed the SAFE Drugs Act of 2025, which would limit compounded versions of GLP-1 weight-loss drugs, a key growth area for the company. Major GLP-1 makers like Novo Nordisk and Eli Lilly rose, while safety concerns and FDA reports led to more rules.

TUI gave a more cautious 2026 outlook, forecasting 2–4% revenue growth and 7–10% profit rise, citing economic and geopolitical uncertainties. Strong cruise and hotel performance offset weaker airlines. The company plans cost-cutting, fleet upgrades, and a new €0.10 dividend, aiming for greater efficiency and profitability despite a weak share price and German market challenges.

Rheinmetall CEO Armin Papperger is exploring ways to acquire part of rival KNDS to create a European land defence leader. Options include buying the German family’s stake or KNDS’s German operations. The deal may face resistance from KNDS and the French government, which controls half of the company.

Delivery Hero shares rose 14% as the company reviews strategic options to improve efficiency, finances, and capital allocation. Investors, including major shareholders, are pushing for a full review or potential sale of assets after a 32% share price drop. Key divisions like Korea’s Baedal Minjok may attract buyers such as Uber or Meituan.

Ferrari shares hit a two-year low after Oddo BHF and Morgan Stanley downgraded the equity, citing slower F80 deliveries, limited volume growth, and softer near-term profitability. Oddo cut its 2026 EBIT forecast, while Morgan Stanley expects modest top-line growth and capped valuation multiples amid concerns over EV launches and residual values.

Stifel lowered its Oracle price target to $275 dollars, citing concerns over rising capital expenditure and near-term earnings pressure. Analysts noted that while management aimed to reassure investors by highlighting funding plans and preserving investment grade credit, the substantial spending could support faster cloud growth and stronger earnings per share by fiscal 2027.

TD Cowen named Amazon its top large-cap pick for 2026, keeping a Buy rating and $300 target. The firm cites faster AWS growth from AI demand, strong e-commerce and advertising momentum, and margin expansion. It forecasts $104 billion operating income, high-teens ad revenue growth, and continued efficiency gains across retail and cloud operations.

After Home Depot’s Investor Day, Truist sees the company well-positioned for long-term share gains despite macro uncertainty. 2025 guidance is confirmed, with 2026 comps flat to +2% and EPS ~$15.15. Truist expects a potential multi-year upcycle once comps recover, reiterating a Buy rating, though near-term timing remains uncertain amid economic challenges.

JPMorgan upgraded PepsiCo to Overweight, citing stronger innovation, marketing, and productivity positioning for 2026. The firm expects mid- to high-single-digit EPS growth, supported by core Frito Lay investments and new brands like Siete, Poppi, and Alani Nu. Despite market caution over margins and sales timing, early signs show better top-line performance momentum.

Bernstein downgraded Ferrovial to Market-Perform from Outperform, citing limited upside after a 41% share rise this year, despite a strong long-term infrastructure profile. The price target was raised to €60.3, reflecting higher valuations for toll roads and contracting. Key catalysts include JFK Terminal One opening, Nasdaq 100 inclusion, and potential US project awards.

TD Cowen initiated SharkNinja with a Buy rating and $135 target, citing strong product innovation and marketing. The firm expects high single-digit sales growth, rising EBITDA, international expansion, and beauty segment growth. Upside could come from capital returns and buybacks, with cautious FY26 guidance likely, but stronger results anticipated through the year.

Upcoming data and events

Today’s US economic data includes jobless claims, trade figures, the November Producer Price Index, wholesale inventories, natural gas stocks, Treasury bill auctions, mortgage rates, and a 30-year bond auction, offering insights into the economy. Major companies reporting earnings include Broadcom, Costco, and Lululemon.

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