Oracle ORCL. Up 39% as S&P 500, Nasdaq 100 Hit Fresh Highs. Is it Time for a Retracement?

[Redator]

Most Read: US CPI Preview: Implications for the DXY & Federal Reserve

The S&P 500 and Nasdaq 100 opened higher on Wednesday as traders grew more confident that the US Federal Reserve will cut interest rates in September. This is because a new report showed that US producer prices unexpectedly went down in August, mainly due to lower costs for services.

Source: TradingView

This news, along with a big stock market gain for the cloud computing company Oracle, helped boost investor confidence.

According to the CME's FedWatch tool, there's a 90% chance of a small rate cut (25 basis points) and a 10% chance of a larger cut (50 basis points) at the Fed's meeting on September 16-17.

Individual Stock Performance - Oracle Drags Markets Higher

After Oracle announced that it expects its cloud business to bring in over half a trillion dollars in booked revenue, its shares jumped by 31.5% in premarket trading reaching around the 39% mark after the US market opened. This surge was due to growing demand for its affordable cloud infrastructure services.

This positive news had a ripple effect, causing gains for several chip companies. Nvidia rose 3.2%, Advanced Micro Devices was up 4.4%, and Broadcom added 3.7%. Companies that supply power to data centers also benefited from the positive forecast, with Constellation Energy rising 2.4%, Vistra advancing 3.6%, and GE Vernova going up 3.9%.

Analysts at BofA Global Research said that while the profitability of AI workloads remains debated, it is clear Oracle is capturing share in the large and fast-growing market for AI infrastructure. They estimate the AI applications industry will reach $155 billion by 2030.

In other stock news, Synopsys saw its shares slide 24% before the market opened. The company, which makes software for designing chips, missed Wall Street's revenue predictions for the third quarter. Its competitor, Cadence Design Systems, also slipped by 4.5%.

Finally, GameStop's shares gained 7.4% after the video game retailer reported higher revenue for its second quarter.

Concerns Grow After Jobs Revision

Despite the fresh highs by both the S&P 500 and Nasdaq 100 today there are some warning signs starting to flash for the US economy.

In September, US equity investors have grown more risk-averse as political uncertainty and stretched valuations dominate concerns, even as recession risks ease and expectations for monetary easing rise.

Elevated valuations in US and global equity markets rest mainly on bullish earnings expectations, led by tech and AI companies benefiting from robust revenue growth, solid profitability, and widening adoption.

The risk of a drawdown in the S&P 500 has risen recently, fueled by low market volatility, slowing economic growth, and ongoing concerns over tariffs and rising inflation later this year. Today's PPI data was positive when it comes to the inflation outlook moving forward and tomorrow CPI print will provide more details.

Source: IsabelNet, Haver Analytics, Goldman Sachs

Add these concerns to historic performance which tells us that September is the worst-performing month for US stocks—this holds true for the past 10 years, 20 years, and going back to 1950. It is rare to see both August and September finish higher in a post-election year.

This was followed by news today from JP Morgan's trading desk that US stocks could drop after the Fed meeting on September 17.

Led by Andrew Tyler, the trading team is concerned that after the Federal Reserve's meeting on September 17, when they are expected to cut interest rates by a small amount, the market might actually drop. This could happen as investors step back to think about several things: new economic data, how the Fed will react to future events, whether too many people are already betting on a rate cut, a decrease in companies buying back their own stocks, and less involvement from individual investors.

Regarding their economic concerns, Tyler and his team believe that with fewer available workers, lowering interest rates could increase the demand for employees. This might cause a more persistent wage inflation. They also note that comments from various companies suggest that more costs from tariffs will likely be passed on to consumers.

On the other end of the spectrum, Wall Street strategists are raising their S&P 500 estimates due to increasing interest in AI and good corporate results. Barclays raised its 2025 year-end target for the S&P 500, for the second time in three months, to 6,450 from 6,050.

This shows a significant divide in where analysts see US equities ending the year and highlights the uncertainties still in play for the remainder of 2025.

In the shorter-term markets will focus on the CPI data release tomorrow before the Fed decision next week, which promises fireworks.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Technical Analysis - Nasdaq 100

From a technical standpoint, the Nasdaq 100 on the four-hour chart appeared to be getting ready for a significant pullback after last Friday.

The index lost around 1% after the lackluster Jobs data but has surged higher this week to fresh all-time highs more than once.

This begs the question, is there any stopping the rally?

The technicals are not giving much away. The RSI period-14 on the four-hour timeframe is approaching overbought territory and that could be the first warning sign to pay attention to.

Given what we have heard from JP Morgan's trading desk, if US equities do not experience a pullback this week or ahead of the Fed decision next week, will the Fed meeting become a ‘sell the news’ event which could be the catalyst for a significant pullback in equity prices.

Nasdaq 100 Four-Hour Chart, September 10, 2025

Source: TradingView (click to enlarge)

Client Sentiment Data - Nasdaq 100

Looking at OANDA client sentiment data and market participants are short on the Nasdaq with 77% of traders net-short. I prefer to take a contrarian view toward crowd sentiment and thus the fact that so many traders are short means the Nasdaq 100 Index could rise in the near-term.

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