Thursday, December 11, 2025
The U.S. stock market is taking a breather today after Wednesday’s powerful “Fed rally,” with major indexes slipping as investors digest a third interest-rate cut of 2025 and fresh worries about whether artificial intelligence spending is running ahead of profits.
Futures-linked benchmarks for the S&P 500 and Dow Jones Industrial Average were recently down around 0.7% and 0.3% from Wednesday’s close, respectively, pointing to a modest pullback from yesterday’s surge. [1]
Heavy selling in Oracle after a disappointing earnings report is hitting tech and AI-exposed names worldwide and overshadowing initial optimism about lower borrowing costs from the Federal Reserve’s decision to cut rates again. [2]
Key takeaways for US stocks today
- Fed cuts rates again: The Federal Reserve lowered the federal funds rate by 25 basis points to a range of 3.50%–3.75%, its third cut since September, but signaled only one more cut in 2026, leaving markets to debate how dovish policy really is. [3]
- Indexes pull back from near-record highs: After Wednesday’s rally took the Dow up 1.05% to 48,057, the S&P 500 up 0.67% to 6,886, and the Nasdaq up 0.33% to 23,654, futures-linked indexes now show declines of roughly 0.3–0.7% on Thursday. [4]
- Oracle sparks AI jitters: Oracle shares plunged more than 11% after its results and outlook fell short of Wall Street expectations while AI/data-center spending surged, triggering fresh fears of an “AI bubble” and dragging down AI chip and cloud stocks globally. [5]
- Bonds firm, dollar softer: Treasury yields are slightly lower and the dollar is weaker as traders price in the possibility of additional easing in 2026 despite the Fed’s cautious message. [6]
- 2026 outlook still broadly positive: Big asset managers such as Morgan Stanley, BlackRock, LPL, and others still forecast higher U.S. equity prices into 2026, but warn that AI concentration, high valuations, and policy uncertainty could make the ride bumpier. [7]
How the US stock market is trading today
As of Thursday’s session on December 11, 2025:
- Wednesday’s close (Dec. 10):
- Dow Jones Industrial Average: 48,057.75, +1.05%
- S&P 500: 6,886.68, +0.67%
- Nasdaq Composite: 23,654.16, +0.33%
- Russell 2000 small-cap index: about +1.3%, closing at a record high. [8]
- Today’s tone (Dec. 11):
- Futures-linked indexes tracking the S&P 500 (“US 500”) and Dow (“US 30”) show declines of roughly 0.7% and 0.3% from Wednesday’s close, respectively. [10]
- An index proxy for the United States stock market (US500) was recently quoted around 6,830, down roughly 0.8% on the day. [11]
- The VIX volatility index is modestly higher near 16, suggesting some pickup in hedging demand but no sign of panic. [12]
In short: US stocks today are giving back a piece of Wednesday’s Fed-driven gains, with traders rotating out of stretched AI leaders and reassessing how many rate cuts are really on the table for 2026.
The Fed’s “hawkish cut”: why markets are conflicted
On Wednesday, the Federal Reserve delivered a widely expected 25-basis-point rate cut, bringing the target range for the fed funds rate to 3.50%–3.75%, its third consecutive cut since September. [13]
The decision was anything but unanimous:
- Three policymakers dissented, including two who wanted no cut and one who argued for a larger 50-basis-pointmove, underscoring a deeply divided Fed. [14]
- The Fed’s updated projections (“dot plot”) show a median expectation of just one additional quarter-point cut in 2026, even as the central bank raised its forecast for GDP growth in 2026 to 2.3% while keeping the unemployment outlook at 4.4% and projecting inflation easing towards the mid‑2% range. [15]
In his press conference, Fed Chair Jerome Powell stressed that:
- The policy rate is now within a broad range of estimates of “neutral,” meaning the Fed sees itself neither strongly stimulating nor strongly restraining the economy.
- Future moves will depend heavily on incoming data, particularly on the labor market, which he described as facing “downside risks.” [16]
Markets interpreted this as a “hawkish cut”: rates are lower, but the bar for further easing is high. While interest-rate futures still price in roughly two cuts in 2026, the Fed’s own projections explicitly show only one, highlighting a gap between policymakers and traders. [17]
Bond yields and the dollar
The rate decision and Powell’s tone rippled across other markets:
- 10-year Treasury yields slipped to around 4.13%–4.15%, a drop of a few basis points from pre-Fed levels.
- Two-year yields fell to roughly 3.5%, reflecting expectations that policy has peaked. [18]
- The U.S. dollar weakened modestly, with the euro breaking above $1.17 as traders bet that U.S. rates may move lower while other central banks hold steady. [19]
Lower yields helped fuel Wednesday’s equity rally, particularly in small caps and cyclical sectors such as industrials and financials, which tend to benefit from cheaper borrowing costs and a stronger growth outlook. [20]
Oracle’s earnings shock: a reality check for the AI trade
If the Fed provided the sugar high for stocks, Oracle supplied the hangover.
Late Wednesday, Oracle reported results and guidance that missed Wall Street expectations on revenue, even as the company announced another huge increase in AI and data-center capital expenditure. The mismatch spooked investors who have grown accustomed to AI-related companies not only spending aggressively, but also delivering equally spectacular growth. [21]
Key points from the Oracle shock:
- Oracle shares tumbled more than 11% in after-hours and European trading, wiping out over $70 billion in market value. [22]
- The company flagged a slower revenue ramp than hoped from AI-related cloud contracts, even as data-center and infrastructure spending continues to balloon. [23]
- Analysts noted growing concerns that big tech’s AI deals are increasingly circular—with hyperscalers and AI leaders signing contracts with each other, financed largely with debt. That raises the risk that if AI adoption or monetization disappoints, valuations could reset sharply. [24]
The shock did not stay confined to Oracle:
- Futures on the S&P 500 and Nasdaq 100 fell about 0.9% and 1.3% in Asia trading as the results hit the tape. [25]
- AI chip names such as Nvidia, Broadcom and AMD were marked lower in after-hours trade, and remain under pressure today as traders rotate away from the most crowded AI winners. [26]
- In Japan, the Nikkei fell around 1%, led by a roughly 7–8% drop in SoftBank Group, a major AI and data-center investor and Oracle partner on the Stargate project. [27]
Put simply: Oracle has become the latest poster child for AI exuberance colliding with earnings reality.
Sector moves: from industrial winners to tech wobble
Wednesday’s Fed rally was broad, but not uniform—and that pattern is shaping how US stocks trade today.
Who led yesterday’s surge
- Industrials were the standout sector, rising about 1.8% and powered by a 15%+ jump in GE Vernova, which doubled its dividend, expanded its buyback authorization, and raised its longer-term revenue and margin forecasts on the back of soaring power demand from AI data centers. [28]
- Blue-chip cyclicals such as Nike, Caterpillar, Johnson & Johnson, and American Express all gained more than 3%, while JPMorgan rebounded strongly from a prior sell-off. [29]
- Small caps, tracked by the Russell 2000, outperformed large caps with a record close, reflecting optimism that rate cuts and solid growth could finally broaden the rally beyond mega-cap tech. [30]
Interestingly, even on the big Fed-rally day, some of the AI leaders lagged:
- Microsoft and Nvidia ended Wednesday among the weaker names in the mega-cap complex, hinting at some early profit-taking in the AI trade even before Oracle’s earnings hit. [31]
Today’s rotation
On Thursday, the tone has flipped:
- AI and growth-heavy tech stocks are under pressure as traders scrutinize whether high valuations can be justified if AI investment remains front-loaded and revenue back-loaded.
- More defensive and income-oriented assets, including gold and high-quality bonds, are finding support as yields edge down and volatility ticks up. Gold futures are up modestly, and the U.S. 10-year yield is slightly lower around 4.15%. [32]
This is exactly the kind of push-and-pull market many strategists have been forecasting for late 2025: supportive macro conditions, but a narrower, choppier leadership dominated by AI, policy, and earnings headlines.
What Wall Street expects next: 2026 stock market and Fed outlook
Despite today’s wobble, most major research houses still see room for U.S. stocks to rise into 2026—though their optimism is increasingly nuanced.
Bullish, but selective
- Morgan Stanley expects U.S. stocks to outperform global peers in 2026, projecting roughly a 14% gain in the S&P 500 over the next 12 months to around 7,800. The bank cites a rare alignment of supportive fiscal policy, Fed rate cuts, deregulation, and AI-driven productivity gains, while acknowledging there will be “bumps along the way.” [33]
- LPL Research, via analysis highlighted by Kiplinger, pegs the average 2026 year‑end target for the S&P 500 around 7,269, with its own base case in the 7,300–7,400 range. That implies high single‑digit to low double‑digit upside from current levels, supported by forecast 2026 S&P 500 earnings of about $309, roughly 13–14% growth versus 2025. [34]
- BlackRock remains “pro-risk” and overweight U.S. equities, arguing that the AI buildout is so large it has become a macro driver of growth. At the same time, the firm warns that the AI boom is capital‑intensive, increasingly debt‑financed and highly concentrated in a handful of mega‑caps—conditions that call for more active stock picking and caution on long‑duration Treasuries. [35]
A more cautious counterweight
- Vanguard’s latest “AI exuberance” outlook is more guarded: the firm sees U.S. real GDP growth accelerating toward ~2.25% in 2026, helped by AI investment and fiscal stimulus, but forecasts the Fed’s policy rate only drifting to about 3.75% by end‑2026, leaving limited room for aggressive cuts. [36]
- Vanguard also warns that expected returns for U.S. growth and mega‑cap tech stocks are relatively modest—around 4–5% per year over the next decade—given how far valuations and earnings expectations have already run. It favors value stocks, high-quality U.S. bonds, and non‑U.S. developed markets as offering better risk‑reward than the most crowded AI trades. [37]
Where does the Fed fit into these forecasts?
Bond managers like PIMCO broadly agree with the Fed’s guidance that policy is now close to neutral:
- PIMCO expects the Fed to hold rates at 3.50%–3.75% for much of 2026, then resume gradual cutting later in the year once there is clearer evidence that inflation is drifting sustainably toward 2% and the labor market has softened further. [38]
At the same time, some equity strategists, including Morgan Stanley’s Michael Wilson, argue that the Fed may ultimately have more room to cut in 2026 than markets now assign, especially if pockets of labor-market weakness persist even as AI and fiscal stimulus support growth. That scenario, they say, would be equity‑friendly, particularly for lagging sectors like health care and industrials. [39]
Macro and earnings calendar: what traders are watching next
Even with the Fed meeting behind them, investors still have plenty of catalysts to navigate over the coming days:
- Initial jobless claims: Weekly unemployment claims for the U.S. are due today and remain a key high‑frequency gauge of labor‑market health. The most recent reading showed claims dipping to around 191,000, signaling that layoffs remain relatively contained even as the Fed eases policy. [40]
- Trade balance and other shutdown-delayed data: Thursday’s calendar also features U.S. trade data, part of a backlog of government releases that were postponed during the recent federal shutdown, making it harder for policymakers and traders to read the “true” state of the economy. [41]
- Broadcom earnings: AI-focused chipmaker Broadcom reports fiscal Q4 results later today, with options markets pricing in a sizable move in the stock. The company’s outlook on AI-driven networking and custom chips will be closely watched as a cross‑check on Oracle’s more cautious tone. [42]
- BLS labor releases and upcoming CPI: The Bureau of Labor Statistics is scheduled to release state employment and unemployment data today, with the next national jobs report and CPI update due next week. Those numbers will heavily influence whether the Fed can indeed pause cuts for several meetings, as many officials now prefer. [43]
In other words, today’s pullback may be less about a single headline and more about markets transitioning from “Fed day” adrenaline back to data‑watching mode.
What this means for investors
For anyone following US stocks today, a few themes stand out:
- The macro backdrop is still supportive. A Fed that is cutting—albeit cautiously—combined with decent growth and moderating inflation is historically a reasonably good environment for equities, especially if earnings hold up. [44]
- AI remains the dominant driver—but also the biggest source of risk. From BlackRock to Vanguard, virtually every major outlook now frames AI as both the engine of growth and the locus of potential bubbles. Oracle’s miss is a reminder that not every AI‑linked dollar of capex immediately translates into profit. [45]
- Leadership may broaden. Wednesday’s rally saw industrials, financials, and small caps outperform tech mega‑caps. If rate cuts continue—whether in 2026 or sooner—those “old economy” sectors could play a bigger role in future gains, particularly in infrastructure, energy, and AI‑related power and grid upgrades (think GE Vernova). [46]
- Volatility is likely to rise. Strategists at firms like Vanguard and PIMCO emphasize that high valuations, concentrated leadership, and uncertainty around the exact path of Fed cuts make larger swings in both stock and bond markets more likely in 2026 than in the early stages of this bull run. [47]
For now, Wall Street today is in “digest and reprice” mode: digesting a divided Fed, repricing AI expectations after Oracle, and looking ahead to the next wave of macro data and AI‑heavy earnings.
This article is for informational purposes only and does not constitute financial advice or a recommendation to buy or sell any security or asset.
References
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