AI Boom Fuels Record Highs as Oracle Surges; Fed Rate Cut Hopes Rise on Cooling Inflation Amid Data Scrutiny
Market Snapshot
- S&P 500: 6,532.04 (+0.30%)
- Nasdaq Composite: 21,886 (+0.03%)
- Dow Jones Industrial Average: 45,491 (-0.48%)
- FTSE 100: 9,272 (+0.28%)
- 10-Year US Treasury Yield: 4.05%
- Oil (WTI): $63.40 (-0.98%)
- Gold: $3,623 (-0.50%)
- Bitcoin (BTC): $114,061 (+0.08%)
- Ethereum (ETH): $4,420 (+1.63%)
US Markets Rally on AI Boom and Rate Cut Hopes
The S&P 500 and Nasdaq Composite closed at new record highs for a third consecutive day, propelled by a surge in artificial intelligence stocks and growing optimism for an interest rate cut by the Federal Reserve. The positive sentiment was reinforced by cooling inflation data, although some analysts caution that the AI sector's high valuations warrant scrutiny.
Oracle Sparks Widespread AI Rally
Shares in Oracle surged approximately 36% after the company reported a $455 billion order backlog, driven by AI-related cloud service deals with companies including OpenAI, Meta, and xAI. The one-day rally, Oracle's best since 1992, added $244 billion to its market capitalisation and briefly made chairman Larry Ellison the world's richest person. The enthusiasm spread across the sector, lifting shares in Nvidia and Broadcom. However, some market observers note signs of a potential slowdown, with Nvidia posting its narrowest earnings beat in nine quarters and Palantir trading at a very high forward earnings multiple, raising questions about stretched valuations.
Inflation Data and Labour Statistics Under Scrutiny
Economic data bolstered market optimism as the US Producer Price Index (PPI), a measure of wholesale inflation, unexpectedly fell by 0.1% in August, contrary to forecasts of an increase. This has solidified expectations that the Federal Reserve will lower interest rates at its next meeting, with the upcoming Consumer Price Index (CPI) report being the final major data point influencing the decision.
However, the reliability of the data that heavily influences Fed policy is facing questions. The US Bureau of Labor Statistics (BLS) is now under an official review by the Labor Department's internal watchdog. The investigation follows a series of significant downward revisions to its monthly jobs reports, including a recent benchmark revision showing the US economy produced 911,000 fewer jobs between March 2024 and March 2025 than previously thought.
The 'Silent Recession' and New Cycle Debate
Following the BLS jobs data revisions, some economists suggest the US economy may have already experienced a 'silent recession' that peaked around April 2024 and concluded in early 2025. This contrarian view posits that the economy has since entered the early phase of a new business cycle. Proponents point to a full cycle pattern observed in various indicators, including earnings revisions, investor positioning, and CEO confidence, which all showed a downturn and subsequent recovery during that period. The argument suggests that market downturns, such as the S&P 500's brief bear market earlier this year and the year-long stagnation in many crypto assets, reflected this economic slowdown. If correct, this 'early cycle' environment could signal a more prolonged rally for risk assets than is widely expected.
US Housing Market Responds to Lower Rates
Lower borrowing costs are having a notable impact on the US housing market, with mortgage demand reaching its highest level in nearly three years. The average rate for a 30-year fixed loan has fallen below 6.50%, down from over 7% earlier in the year, spurring a surge in both refinancing and home purchase applications.
Global Market Movements
Equity markets outside the US also saw significant activity, with Japan's primary index reaching a new peak and European markets reacting to major corporate developments.
Asian Markets Hit Milestones
Japan's Nikkei 225 index rallied to an all-time high. A key contributor was investment firm SoftBank, which saw its shares surge over 8%, partly due to its business connections with the high-performing Oracle. Concurrently, a major shift in monetary policy is anticipated, with 88% of economists forecasting that the Bank of Japan will raise interest rates by January, ending a multi-decade era of ultra-loose policy.
Corporate News From Europe and Beyond
In the UK, the FTSE 100 index remained steady near recent highs. In corporate news, Swedish fintech firm Klarna had a successful debut on the New York Stock Exchange, with its shares closing 15% higher. The move contributes to a sense of returning enthusiasm for IPOs during what is set to be the busiest week for new listings since 2021.
Danish pharmaceutical giant Novo Nordisk announced it is cutting 9,000 jobs, or 11% of its global staff, in a cost-cutting measure aimed at saving over $1 billion annually. The move comes as its stock has declined significantly from its peak. In other developments, Chipotle announced plans to expand into Asia, Amazon's subsidiary Zoox launched its free robotaxi service in Las Vegas, and Uber is partnering with Joby to offer helicopter rides via its app starting in 2026. Meanwhile, auto lender Tricolor Holdings, which specialised in loans to individuals lacking credit, filed for Chapter 7 bankruptcy.
Digital Assets and Cryptocurrency
The digital asset market saw the launch of new investment products and continued regulatory developments, alongside diverging fortunes for different crypto-related investment strategies.
New Investment Vehicles and Market Dynamics
The first US exchange-traded fund (ETF) for Dogecoin has launched, offering investors exposure through swap agreements. In private markets, blockchain-based lender Figure is planning an IPO with a target valuation over $4 billion. At the same time, some companies that heavily invested their corporate treasuries in Bitcoin have seen their share prices fall, even as Bitcoin's price remains high. In contrast, Solana's token (SOL) has surged in value ahead of a major network upgrade aimed at dramatically increasing transaction speeds.
Regulatory Landscape Evolves
There were several signs of a developing regulatory environment in the US. SEC Chairman Paul Atkins remarked that “most crypto tokens are not securities,” a statement that could significantly impact future regulation. The SEC also appointed the crypto-literate James Moloney to lead its IPO division. However, concerns about the industry's political influence persist, highlighted by recent lobbying accusations.
NOTE: This content is for informational and educational purposes only and does not constitute financial advice. Always do your own research. Not financial advice (NFA).