Stocks Halt Record-Breaking Run as Oracle Tumbles: Markets Wrap
(Bloomberg) — Wall Street traders sent stocks lower after a series of all-time highs spurred signs of buyer exhaustion and calls for a breather. Bonds rose as a $58 billion Treasury sale drew solid demand.
The market ebullience driven by optimism over artificial intelligence gave way to concerns about the rally being excessive after a 35% surge in the S&P 500 from its April lows. Tech giants dragged down the benchmark, with losses accelerating on a report that Oracle Corp.’s profit margin in its cloud computing business is lower than many have been estimating. The shares sank 4%.
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Investor optimism has grown heated in recent months, with many investors seeming too busy chasing the upside to worry about risks like a US government shutdown and stretched valuations.
Goldman Sachs Group Inc.’s trading desk reported last week that bullish sentiment among clients was the highest since December. A sentiment tracker compiled by Barclays Plc has been sitting near a level that indicates exuberance. A similar Bloomberg Intelligence measure is back to “manic” zone.
“A period of consolidation would not come as a surprise after such a strong recent run, but we believe the equity rally is underpinned by solid fundamentals that should continue to support the market,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.
The S&P 500 dropped to around 6,700. The yield on 10-year Treasuries slid four basis points to 4.11%. The dollar rose.
Traders also parsed remarks from Federal Reserve officials, with Governor Stephen Miran repeating that his expectations for a limited impact on inflation from tariffs mean the Fed can continue easing policy. Fed Bank of Minneapolis President Neel Kashkari cautioned that any drastic cuts to rates would risk stoking inflation.
“Profit-taking risks have rapidly risen across markets, and are particularly elevated for Nasdaq, potentially hampering further upside,” said Citigroup’s Chris Montagu.
Craig Johnson at Piper Sandler says he remains optimistic, particularly with macro tailwinds lifting the stock market. However, he believes there are subtle signs of diverging momentum that warrant vigilance, especially with over-extended stocks that have risen substantially in recent weeks.
“A brief consolidation or shallow pullback would be welcomed to set up better risk-reward opportunities,” he noted.
At Fundstrat Global Advisors, Mark Newton says “overbought conditions” are notoriously a poor reason to avoid owning US equities, as many investors realize that can likely persist and don’t have to specifically represent a reason for concern. Yet “it’s important to pay attention and not become overly complacent.”
“Of course valuations are moving higher. They usually do, especially after swift selloffs like the one we saw in April,” said Callie Cox at Ritholtz Wealth Management. “Now, we need to see earnings and economic data follow through.”
Cox says price-to-earnings ratios pushing towards extremes should encourage investors to rebalance.
“There’s still a lot of hidden value – or selloff protection – out there that could keep you cushioned against AI disappointment,” she noted.
Some Wall Street pros note that having multiple large technology stocks surge by double-digits in quick succession could be a sign that valuations have become disconnected from underlying fundamentals, and that investors have been buying primarily based on the fear of missing out on further gains.
The moves come amid growing concern about a bubble forming around AI as the key players pledge billions of dollars in deals with a cohort of companies making infrastructure for the technology. As more money is spent, there’s mounting fear that the trend will end in a crash the way it did 25 years ago following the dot-com euphoria.
Warnings that we’re seeing a repeat of the dot-com bubble are heard regularly, noted Louis Navellier at Navellier & Associates. The big difference is that this time, the players are huge companies with huge balance sheets and existing cash flow, he said.
“If profitability takes longer than expected, a few of the hardware suppliers will suffer operating losses,” Navellier added. “Nevertheless, with the market so heavily weighted to companies that are all-in on the AI bet, any serious setbacks on the prospects of AI profitability will have a serious impact on market indexes in the short term.”
Corporate Highlights:
Dell Technologies Inc. roughly doubled its growth estimates for sales and profit for the next two years, and said demand for artificial intelligence products will extend those higher projections at least through the 2030 fiscal year. International Business Machines Corp. announced a plan to integrate Anthropic’s artificial-intelligence technologies into its software solutions. Tesla Inc. plans to unveil a cheaper version of the Model Y on Tuesday, according to people familiar with the matter, following through on assurances it will have a more affordable vehicle to counter the loss of US incentives for electric vehicles. Gambling stocks led by DraftKings Inc. and Flutter Entertainment Plc fell Tuesday after the owner of the New York Stock Exchange announced plans to invest as much as $2 billion in Polymarket, a crypto-based betting platform. Constellation Brands Inc., the owner of the Corona and Modelo Especial brands in the US, reported better-than-expected results for its fiscal second quarter, citing robust beer and wine sales. Ford Motor Co. faces months of disruptions to its business after a major fire at an aluminum plant in New York, the Wall Street Journal reported. Ethiopian Airlines has more than 100 planes on order with Boeing Co., but delivery delays are hampering expansion at Africa’s biggest carrier. Intercontinental Exchange Inc., owner of the New York Stock Exchange, plans to invest as much as $2 billion in cash in Polymarket, a crypto-based betting platform. Bank of New York Mellon Corp. is exploring tokenized deposits to enable clients to make payments using blockchain, as major banks across the world step up use of the technology underpinning digital assets to transfer funds. Rising investor appetite for digital infrastructure, energy and transportation assets boosted fundraising for Manulife Investment Management, which closed its largest-ever infrastructure fund with $5.5 billion. Mercedes-Benz Group AG’s third-quarter car deliveries slumped 27% in China, where luxury spending remains muted and local manufacturers are dominating on electric vehicles. Zurich Insurance Group AG said it will reject BBVA SA’s bid for Banco Sabadell SA, raising the stakes in the takeover battle that’s set to end on Friday. What Bloomberg Strategists say…
“The S&P 500 has declined to a key support level of 6,700. The move so far still reflects positioning dynamics more than any change in the macro narrative, but the potential for a greater pullback is growing.”
—Michael Ball, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.4% as of 1:19 p.m. New York time The Nasdaq 100 fell 0.6% The Dow Jones Industrial Average fell 0.3% The MSCI World Index fell 0.5% Bloomberg Magnificent 7 Total Return Index fell 0.8% The Russell 2000 Index fell 1% Oracle fell 3.7% Currencies
The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.3% to $1.1674 The British pound fell 0.3% to $1.3445 The Japanese yen fell 0.7% to 151.41 per dollar Cryptocurrencies
Bitcoin fell 3.1% to $121,402.76 Ether fell 4.3% to $4,488.22 Bonds
The yield on 10-year Treasuries declined four basis points to 4.11% Germany’s 10-year yield declined one basis point to 2.71% Britain’s 10-year yield declined two basis points to 4.72% The yield on 2-year Treasuries declined two basis points to 3.56% The yield on 30-year Treasuries declined four basis points to 4.71% Commodities
West Texas Intermediate crude fell 0.3% to $61.48 a barrel Spot gold rose 0.5% to $3,982.22 an ounce ©2025 Bloomberg L.P.
