The stock market has ended the week with significant gains, primarily fueled by new inflation data that has strengthened expectations for an upcoming interest rate cut by the Federal Reserve. This positive sentiment has led to a notable advance in major U.S. indices. Additionally, Oracle's stock experienced a substantial surge following an impressive increase in its remaining performance obligations, which has also had a significant impact on the financial standing of its co-founder, Larry Ellison.
Investors are closely monitoring the Federal Reserve's upcoming policy meeting, where a 25-basis-point rate cut is widely anticipated. This expectation is largely based on recent economic indicators, including both the producer price index (PPI) and consumer price index (CPI). The August PPI unexpectedly declined month-over-month for both core and headline measures, showing a deceleration from July's year-over-year figures. While the August CPI's headline number was slightly higher than predicted, the core CPI remained consistent with July's increase. These data points, combined with signs of a cooling labor market, have solidified the market's belief in the Fed's accommodative stance. Traders are now largely convinced that the Fed's monetary policy committee will implement a 25-basis-point rate cut next week, with further cuts of the same magnitude projected for October and December.
In the realm of corporate earnings, Oracle (ORCL) captured considerable attention. Despite missing its quarterly revenue and earnings estimates and maintaining an unchanged forecast, the cloud software giant's stock surged by approximately 36%. This remarkable increase was driven by a key metric: remaining performance obligations (RPO), which more than quadrupled to $455 billion. This exponential growth in RPO, representing committed revenue from signed contracts not yet recognized, was interpreted by analysts as a strong vote of confidence in the company's future capabilities. The surge added nearly $250 billion to Oracle's market value and notably propelled co-founder and Chief Technology Officer Larry Ellison past Elon Musk to become the world's wealthiest individual.
Globally, various indices demonstrated positive movement. London, France, and Germany all reported gains, with Japan, China, Hong Kong, and India also experiencing increases. The commodities market saw crude oil and gold rise, while natural gas declined. The ten-year bond yield remained relatively stable. In the cryptocurrency sector, Bitcoin, Litecoin, Ethereum, and XRP all showed significant advances, reflecting a broader positive trend in digital assets.
This week's market performance underscores a growing optimism among investors, driven by the prospect of a more favorable monetary policy environment and strong individual corporate performances. The Federal Reserve's actions in the coming week will be a critical determinant of market direction, as will be the ongoing assessment of inflation trends and corporate earnings reports.