US stocks continue downward trend for the third day in a row

Tech giant Oracle's fall points to a growing unease in the AI sector

US stocks continue downward trend for the third day in a row

The S&P 500, Nasdaq Composite, and the Dow Jones Industrial Average has continued to decline, driven by tech giant Oracle’s stocks decreasing by 5% and yields reaching 4.2%, as reported by CNBC.

The S&P 500 had reportedly closed with a 0.50% decline at 6,604.72. Meanwhile, Nasdaq Composite also decreased by 0.50%, reaching 22,384.70. Dow Jones Industrial Average ended with a 0.38% decrease, which amounted to 45,947.32.

A factor in Oracle’s recent decline was a sell rating issued in the new coverage by Rothschild & Co. Redburn, which projected a 40% drawback due to how the market is overestimating the way the firm’s recent AI deals will boost its core cloud business.

The analysis also suggested that Oracle’s five-year cloud revenue guidance will equate to $60 billion in value, further implying that the market may be pricing in a scenario that may not happen, according to AskTraders.com.

From how Oracle has fared within the stock market, its current position seemingly reflected the market’s concern regarding record-high valuations and the potential risk attributed to circular relationships within the AI industry, according to CNBC.

“Oracle had just a massive run-up. Some giveback and softness is probably warranted with how quickly and how dramatically the market cap has exploded,” said Keith Buchanan, a senior portfolio manager at Globalt Investments.

Buchanan also expressed his doubts over Oracle’s cloud infrastructure growth projections, noting that the magnitude of the orders was “eye-catching” but still held risk if it was concentrated into few orders that were from few end markets.

Meanwhile, the 10-year Treasury yield reached 4.2%, following the lower number recorded on the initial claims for unemployment insurance. This increase had contributed to the selling in tech shares, which caused many investors to take off some risk.

According to the Labor Department, first-time fillings for jobless benefits were at 218,000, which was significantly lower than the estimated 235,000 by some economists. It was also 14,000 lower than the revised initial unemployment claims reported in the previous period.

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