Third consecutive day of joint declines as rate-cut expectations retreat…Oracle plunges 5.5% [New York market briefing]

The three major New York stock market indices fell together for a third consecutive day. This is attributed to diminished hopes for a rate cut after the U.S. second-quarter gross domestic product (GDP) growth rate was revised sharply upward.

On the 25th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 45,947.32, down 173.96 points (0.38%) from the previous session. The Standard & Poor's (S&P) 500 index closed at 6,604.72, down 33.25 points (0.50%), and the Nasdaq Composite, centered on technology stocks, closed at 22,384.70, down 113.16 points (0.50%).

With the U.S. second-quarter GDP showing a ‘surprise’ increase by about the largest margin in roughly two years, calls to slow the pace of the Federal Reserve’s rate cuts resurfaced.

According to the U.S. Department of Commerce, the finalized second-quarter GDP growth rate on a seasonally adjusted basis came in at an annualized 3.8% from the previous quarter. Compared with the finalized first-quarter growth rate of -0.6%, it rebounded sharply even accounting for base effects. It was the highest growth rate since Q3 2023’s 4.7% and exceeded both market expectations and the preliminary estimate of 3.3%.

In particular, attention was drawn to the revival of economic growth due to increased consumer spending alongside a decline in imports. The rebound in consumption, which accounts for two-thirds of the U.S. economy, can be interpreted as a return to a normal trajectory despite tariff-related uncertainties.

Improvements in August durable goods orders and weekly initial jobless claims, released the same day, also reinforced this perception. Durable goods orders can be used as an indicator to gauge corporate capital spending trends and thereby predict U.S. manufacturing activity.

According to the Commerce Department, August durable goods orders were recorded at US$312.1 billion on a seasonally adjusted basis. That was an increase of US$8.9 billion (2.9%) from the previous month and far exceeded the market’s expected 0.5% decline. Weekly initial jobless claims were 218,000 on a seasonally adjusted basis, below the market expectation of 235,000.

As the economy showed signs of strength, the rationale for cutting rates weakened. According to the CME FedWatch Tool at the Chicago Mercantile Exchange (CME), the federal funds futures market reflected a 60.4% chance of a 0.5% percentage point cut in the policy rate by December. That probability was 73.3% near the previous day’s close.

Concerns over an "AI industry bubble" also weighed on the market. Oracle, the U.S. cloud infrastructure company, fell 5.5% amid skepticism over its large contract with OpenAI, marking a third straight day of weakness. It has fallen about 16% from its recent peak.

Rothschild & Co Redburn said in a report that day, "The market is overestimating Oracle’s recent AI cloud deal," and warned that "Oracle’s stock will see a 40% correction."

By sector, all sectors except energy and technology fell. Tesla, which had risen sharply recently, slid 4.38% that day. Used-car retail giant CarMax plunged more than 20% after reporting quarterly results that fell short of expectations.

Canadian miner Lithium Americas, which surged more than 95% the previous day on news that the Donald Trump administration was pursuing a stake acquisition, jumped another 22% on the day.

The CBOE Volatility Index (VIX) rose 0.56 points (3.46%) from the previous session to 16.74.

Go Jeong-sam, Hankyung.com reporter jsk@hankyung.com