Wall Street is powering ahead with another stock market rally, supported by easing inflation data, investor optimism on Federal Reserve policy, and a surge in corporate earnings linked to artificial intelligence (AI). The S&P 500 climbed 0.5% in early trading Wednesday, setting its sights on a second consecutive all-time high. The Nasdaq Composite rose 0.5% while the Dow Jones Industrial Average slipped modestly by 75 points.
One of the major movers was Oracle (NYSE:ORCL), which jumped sharply after announcing a slate of AI-related cloud deals that could supercharge its revenue trajectory. The yield on the 10-year Treasury also eased to 4.05% following an encouraging wholesale inflation report, fueling hopes that interest rate cuts may be on the horizon.
Oracle Leads the AI Charge
Oracle shares surged more than 32% in off-hours trading after the company revealed it had signed four multi-billion-dollar cloud contracts. These agreements are expected to boost its cloud infrastructure revenue by 77% in fiscal 2025, reaching $18 billion. Oracle’s business in cloud infrastructure—providing the essential hardware and software for digital operations—has become a centerpiece of its growth strategy, particularly as demand for AI applications accelerates.
The news positions Oracle as a critical player in the AI boom, drawing comparisons with other mega-cap tech leaders like Tesla (NASDAQ:TSLA), Microsoft (NASDAQ:MSFT), and Nvidia (NASDAQ:NVDA), which have also benefited from explosive AI-driven demand.
Klarna’s Market Debut
Another highlight for the stock market rally is Klarna’s long-awaited IPO. The Swedish “buy now, pay later” fintech priced its public offering at $40 per share, higher than previously estimated. Its debut marks one of the largest European fintech listings of the decade and reflects strong investor appetite for alternative payment platforms despite regulatory challenges. Klarna’s performance will be closely watched as a bellwether for consumer fintech demand.
Inflation Data and Fed Policy
The U.S. Labor Department’s August report on wholesale inflation brought welcome relief after a spike in July. Producer prices, which track costs before they reach consumers, moderated, supporting expectations that the Federal Reserve may cut interest rates. Analysts now believe the Fed could deliver up to three cuts before the end of 2025, with the first potentially coming at its next policy meeting.
Ahmad Assiri, research strategist at Pepperstone, noted, “The broader narrative is increasingly anchored on expectations that the Fed will deliver a rate cut at next week’s meeting.”
While lower rates could reinvigorate growth and the labor market, they also pose the risk of rekindling inflation. The upcoming consumer inflation report will be crucial in determining whether wholesale cost pressures are reaching households.
Global Markets in Sync
The stock market rally extended beyond the U.S., with Japan’s Nikkei 225 rising 0.9% and South Korea’s Kospi up 1.7%. European markets also edged higher: France’s CAC 40 added 0.5%, Germany’s DAX inched up 0.1%, and Britain’s FTSE 100 rose 0.3%.
However, U.S.-China trade tensions remain a key risk factor. Ongoing tariff disputes, with the U.S. imposing a 30% tariff on Chinese imports and China countering with a 10% levy, inject uncertainty into global supply chains.
Commodities Add Fuel
Energy and commodities also supported investor sentiment. Benchmark U.S. crude rose to $63.21 per barrel, while Brent crude advanced to $66.98. Gold prices hovered near record highs at $3,694 per ounce as geopolitical concerns in the Middle East heightened safe-haven demand. Israel’s strike on Hamas leadership in Qatar underscored the fragile backdrop.
Outlook for Investors
This latest stock market rally reflects the convergence of several forces: cooling inflation, optimism around Fed rate cuts, and corporate wins in the AI sector. Oracle’s breakthrough contracts and Klarna’s debut add momentum, while global markets remain broadly supportive.
Investors will closely monitor the upcoming consumer inflation data, which could either validate expectations of rate cuts or prompt the Fed to maintain its cautious stance. For now, Wall Street seems set on breaking more records, riding the dual wave of AI optimism and monetary easing hopes.
Featured Image – Depositphotos
