Wall Street is close to setting record highs, even as Oracle tumbles on AI worries

If the market does return to records, it would mark the latest time it’s powered through what had appeared to be a debilitating set of worries. Some of the most recent included concerns about what the Federal Reserve will do with interest rates and whether all the dollars flowing into AI chips and data centers will produce profits and productivity as prolific as proponents are promising.

Such worries had sent Wall Street last month to some of its worst days since its sell-off during April, but several factors helped it regain its footing. Key among them was a continuing parade of companies saying they’re making bigger profits than analysts expected. Stock prices tend to track with corporate profits over the long term.

The Fed also on Wednesday cut its main interest rate for the third time this year and indicated another cut may be ahead in 2026. Wall Street loves lower interest rates because they can boost the economy and send prices for investments higher, even if they potentially make inflation worse.

The Fed’s chair, Jerome Powell, did hint that interest rates may be on hold for a while. But he helped soothe nerves when his comments appeared to be less harsh in shutting off the possibility of more cuts in 2026 than investors had expected.

Easier interest rates can give the biggest benefits to the smallest companies, which are more likely to be losing money and often need to borrow to grow. The Russell 2000 index of the smallest U.S. stocks jumped 1.2% to help lead the market.

Banks and other companies whose profits are most closely tied to the strength of the U.S. economy also rallied. Gains of 3% for Goldman Sachs and 6% for Visa were the two strongest forces pushing the Dow higher.

Eli Lilly rose 1.6% after announcing encouraging results from a clinical trial for adult patients who are obese or overweight and have knee osteoarthritis, without diabetes.

The Walt Disney Co. added 1.8% after OpenAI said the entertainment giant is investing $1 billion in it. It’s part of a three-year agreement that will also allow OpenAI to use more than 200 Disney, Marvel, Pixar and Star Wars characters to generate short, user-prompted social videos.

Planet Labs PBC soared 36.8% after the provider of satellite images used by governments and businesses reported stronger results for the latest quarter than analysts expected.

But a return to records for the U.S. stock market would not mean all the worries are gone.

Oracle dropped 9.8% and had briefly been on track Thursday for its worst day since 2001, when the dot-com bubble was still deflating. It reported 14% growth in revenue for the latest quarter, which came up just short of analysts’ expectations, though its profit topped forecasts.

Doubts remain about whether all the spending that Oracle is doing on AI technology will be worth it. Analysts said they were surprised by how much Oracle may spend on AI investments this fiscal year, and questions continue about how the company will pay for it.

Such doubts are weighing on the AI industry broadly, even as many billions of dollars continue to flow in.

Nvidia, the chip company that’s become the poster child of the AI boom and is raking in close to $20 billion each month, fell 1.6% Thursday. It was the single heaviest weight on the S&P 500.

Oracle Chairman Larry Ellison said it will continue to buy chips from Nvidia, but it’s now taking a policy of “chip neutrality,” where it will use “whatever chips our customers want to buy. There are going to be a lot of changes in AI technology over the next few years and we must remain agile in response to those changes.”

Also on the losing end of Wall Street was Oxford Industries. The company behind Tommy Bahama and Lilly Pulitzer dropped 21% after highlighting how its customers have been seeking out deals and are “highly value-driven.”

CEO Tom Chubb said the start of the holiday shopping season has been weaker than the company expected, and it cut its forecast for revenue for the full year.

Lower- and middle-income households are feeling the squeeze of high prices following years of high inflation, along with a slowing job market. That means a roughly 25% chance of a recession, according to Barry Bannister, chief equity strategist at Stifel.

Even all the spending underway for AI chips is “not enough to offset a consumer pull-back,” he said, and the U.S. stock market still broadly looks expensive relative to history.

In the bond market, Treasury yields held relatively steady after a report said the number of U.S. workers applying for unemployment benefits jumped last week by more than economists expected. That’s a potential indication of rising layoffs.

The yield on the 10-year Treasury held at 4.13%, where it was on late Wednesday and down from 4.18% on Tuesday.

In stock markets abroad, indexes ticked higher in Europe after falling in much of Asia.

Japan’s Nikkei 225 index sank 0.9%, hurt by a sharp drop for SoftBank Group Corp., which is a major investor in AI.

AP Writers Teresa Cerojano and Matt Ott contributed.