Market Shifts: Dow and S&P 500 Hit Records Amid Fed's Less Hawkish Approach

The S&P 500 and Dow reached record highs while the Nasdaq was impacted by Oracle's AI spending concerns. Financial stocks benefited from a less hawkish Fed policy. Market rotation is favoring small caps and cyclicals. Despite concerns, elements of the Fed's policy provided a positive outlook for investors.

The S&P 500 and Dow Jones Industrial Average hit record closing highs on Thursday, driven by a favorable outlook for financial stocks after a less hawkish Federal Reserve policy update. However, the tech-focused Nasdaq Composite lagged due to concerns about Oracle's substantial AI investments.

Oracle shares sharply declined after missing quarterly forecasts and announcing a $15 billion increase in annual spending, raising fears of an AI bubble akin to the 2000s dotcom crash. This development added pressure on tech stocks, although financial stocks led gains, especially in the Dow and the small-cap Russell 2000 index.

Market experts note a trend of rotation towards small-cap and cyclical stocks, hinting at a potential resurgence in global economic growth. Investors remained cautious yet optimistic following Fed Chair Jerome Powell's comments underscoring employment concerns and a cautious approach to rate cuts. As a result, the S&P 500 recorded a modest uptick, while the Dow surged prominently during the session.

(With inputs from agencies.)