S&P 500, Nasdaq new highs, Oracle earnings: Market Domination Overtime

On today's edition of Market Domination Overtime, Yahoo Finance's Julie Hyman and Josh Lipton analyze the market close and the biggest stories of the trading day.

The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) closed at another set of record highs. Meanwhile, the Dow Jones Industrial Average (^DJI) fell by 120 points as stocks prepare for Wednesday's Consumer Price Index (CPI) and the Federal Reserve's interest rate decision.

Oracle's (ORCL) fourth-quarter earnings results missed Wall Street estimates, as adjusted revenue came in at $14.29 billion, below the $14.57 billion expectation. However, the tech giant announced a new partnership with Google Cloud (GOOG, GOOGL) and OpenAI has selected its Oracle Cloud Infrastructure "to extend" Microsoft's Azure AI platform (MSFT), causing the stock to jump. Synovus Trust Senior Portfolio Manager Dan Morgan explains, "They generate about 38% of their revenues right now from cloud. And Oracle's got a great opportunity."

Finally, Julie Hyman and Josh Lipton break down the biggest stories investors should watch for on Wednesday, June 12, from Fed Chair Jerome Powell's press conference to Broadcom (AVGO) earnings.

This post was written by Melanie Riehl

Video transcript

There is the closing bell on Wall Street.

Now it is Mark domination over time.

We are joined by J to get up to speed on the action from today's session.

Let's start where the major averages ended the day.

The dow stay pretty steadily in the red throughout the session down about 100 and 20 points or a third of 1%.

However, we have new records, guess what for the P and the, now that the S and P up about a quarter percent by days.

And remember, of course, we are going into tomorrow morning CP I the Consumer Price Index and then the Federal Reserve going to be holding its press conference in the afternoon, not expecting any change to rates, but we get a new do plot and of course, any commentary that Jay Powell has on inflation and on rates.

So that could certainly push things around the NASDAQ finishing the day higher and also at a record up by 9/10 of 1%.

Jared another day where we sort of had a little bit of a drift higher.

Yes, we did.

I think a lot of this has to do with Apple which is just putting on a clinic today.

This is, this is how a breakup is a breakout is made.

And if we can go to the Wi Fi Interactive, I'll show you briefly what I mean by that.

Also check out the sector action today.

In fact, let's start with the sector action.

You will notice only tech XL K is outperforming the actual S and P 500 communication services also in the green.

But this is a tech story.

And guess what?

Apple front and Center in that haven't seen a dark green square for Apple means it's really outperforming there up over 3% in some time.

And I'm going to be doing a deeper dive uh later in about 30 minutes later on in the show.

But I did find when you have a breakout like this and I've measured tw uh basically 15 of them over the last 20 years, you tend to get average returns of 30% over the next year uh with a green positivity rate of about 90%.

So stay tuned for that also tracking financials, that is a worse sector of the day utilities and industrial is not doing so well.

We can take a look inside the tech sector at unprofitable tech just to show you how the, how the bifurcation is going.

We have kind of a balance board here between green and red, but you take a look at software.

Here you go.

See a little bit of red there here, the semiconductors more red here.

Uh just really haven't seen the tech sector structured like this in some time.

So we, we measure the entire ramifications of all this in about 30 minutes.

Now, I should also point out that Bitcoin is flagging today.

That's my number one leader to the downside and just taking a quick look at Bitcoin where we are, we can see we are having the worst day in a few weeks there.

But as I like to point out, we are still in the upper end of its trading range and just consolidating doesn't mean much until it breaks to the upside or to the downside here, Josh Jared, thank you, appreciate.

Stocks have managed to make headway amid market uncertainty on the US economy.

The fed, of course, kicking off its two day policy meeting as investor skepticism spreads over the path of rate cuts joining us now is Manulife Investment management, senior portfolio manager, Nathan tough, Nathan, good to see you on set.

So I listen to all eyes on that fed meeting.

Um You know, and the expectation is Jay Pow keeps borrowing costs where they are.

But as Julie was saying a lot, you know, you're gonna have that focus on rate objections on Jay Powell's commentary.

What, what are you listening for?

Yeah.

The dot Plot is the important news I think, but the reality is if you're gonna make a shift in the dot Plot, you're gonna have to make a shift in some of your assumptions that go in to feed that dot Plot, right?

And so in order to lower the number of projections for quarter point cuts this year from, let's say three to maybe 1.5 or two.

And I think it's probably gonna be a 1.5.

I think you're gonna have a number of fed members that say one still this year and you're gonna have a number that say two.

And so the average be 1.5, which is certainly lower than the last fed dot plot.

But in order to get that, you're going to have to have an environment where they're going to suggest either growth is going to be a bit higher or inflation is going to be a bit higher or both in order to make that assumption.

Because if they change nothing, then you got a question.

Why did they change a flood dot Plot if they didn't change their assumptions on growth or inflation?

Well, the market is already there, right.

So is it sort of an acknowledgment of reality?

But I guess they can't really do that without changing something?

You're right.

They have to change something and I agree with you.

I think this could be a fairly boring meeting because I, I love, I love a good surprise.

So I do hope something is in the eyes of the beholder that is true.

We're always gonna have something to talk about.

Right.

But the reality is, I do think consensus probably has it fairly right for the time being where we're a bit different from consensus is we actually think there's a possibility that you could see more price, a quarter point cuts over the course of the next, let's say, 18 months.

And the current pricing suggest because we actually think given the fed is roughly 250 basis points below their neutral rate, above their neutral rate, they actually have a lot of flexibility to do quite a few cuts before they actually become restricted.

So we actually think the market is actually under pricing the cutting potential over the course of the next 18 months, timing is somewhat irrelevant, but it's really that magnitude over that longer period of time that matters more to us.

And so, so given that kind of backdrop made you look across the stock market right now, what looks attractive?

Where do you want to be invested?

We are still overweight equity and people are asking why are you over equity when you have a fed policy?

That's arguably restrictive.

And you have slowing economic data.

And I do believe economic data is slowing on the margin.

The positive though is I don't think the economic data is disastrous and in many ways counterintuitively because that weaker data will afford the cutting cycle to begin like other major global Central banks have already done.

That's a positive for equity on top of the underlying fundamentals of equity still remain quite favorable.

We are seeing positive earnings revisions, not only in the US, but outside the US, we're seeing quality of earnings still be very good.

So I think it's premature to get too negative on equity risk and therefore we're staying weight over equity, but we're also sticking with the winners with an equity.

And so I don't think you can be underweight tech yet.

I don't think you can be underweight, the large caps in the US yet.

There will be a time when that makes sense.

I just think it's a, a little premature at this stage to do so I wanna dig more into strategy, but I wanna linger for just a more a moment, not necessarily in the fed but on the other event tomorrow, that might be more exciting.

And that's CP I right.

Are we gonna get, do you think more confirmation that inflation is slowing down the general trend in our view?

Is that inflation data is continuing to slow?

Yes.

Over the last several months, we've had a bit more of a hodgepodge kind of back and forth debate on it.

Slowing too slow, blah, blah, blah.

But I think if you look at the overall trend, inflation is coming down and I fully expect tomorrow, you'll get a number roughly in line with expectations.

But let's be honest, a point point one above or below is going to be market moving.

And that's the reality of just how sensitive the market is right now to just modest differences in inflation.

Despite looking at the big picture that inflation is still trending down.

What about overseas Nate any opportunity specifically?

I think there's more opportunity overseas than people give it credit for him.

And the reality is you take out the dollar dynamics.

There's a lot of stock exchanges outside the US have actually posted decent local returns this year.

We all think about it from a US dollar based perspective in the US because that's how we invest.

But if you're overseas, you've actually gotten some decent returns in parts of Europe and Japan even recently in parts of Asia.

And so there is some decent performance happen.

You want exposure to China, I think you should be starting that.

Now, here's part of the argument we believe one of our big themes this year is that you should no longer assume that global economies are completely synchronized.

They are not, you can point to COVID, you can point whatever argument you make.

But the reality is we shouldn't assume when one economy is slowing in the world, everyone else is.

So as the US begins to slow, we actually start seeing early evidence that China at least directionally is doing more combination and there's a likelihood that growth will pick up.

And I was just in Asia several times over the last few months, I can tell you from March to May my two visits, the sentiment levels within Asia are improving.

So the appetite to take risk is also starting to show up.

And that's an important sentiment shift in my view because local buyers matter a lot to some of those exchanges within the Asia region.

And yet investors from here who have gotten in there have done so at their peril.

Correct.

Yeah, who have, who have you know, over anticipated that the recovery there, this could be another head fake and that's the risk right?

There is a legitimate risk because every other attempt over the last several years to say, oh, now is the time to buy emerging markets or now is the time to buy China has been has failed, right?

And there is a risk that will happen.

But I think what's different this time is you are seeing pretty consecutive pushes in the right direction by the Chinese government and policies to be more accommodative.

It's not a Bazooka but directionally, they're doing the right things steps, baby steps.

Thanks for coming in Nate.

Good to talk to you.

Appreciate it.

We got to get to oracle earnings.

They are just coming out in the past few moments and we looking at a miss here for these numbers.

So if you look at the shares, they're actually moving higher.

Interestingly enough.

I think if I had to guess that that has to do with a partnership that the company also know.

So let's talk about that first.

OK. Oracle and Google Cloud are announcing a partnership.

It also is involving open A I which will be using Oracle cloud infrastructure to extend the micro soft Azure platform.

So it looks like there are multi prongs and what they're calling multi clouds as part of that.

So that's on the one side.

Then the company is also saying its fourth quarter revenue missed estimates.

$14.29 billion 14.57 billion dollars is what the analysts had been anticipating earnings per share.

Also missing estimates by two cents a share.

The company is declaring quarterly, it's quarterly cash dividend of 40 cents a share.

And then there is another area of beat that we should mention that's in cloud infrastructure revenue which is coming in at $2 billion a little bit ahead of estimates.

Yeah, fiscal Q four is typically a seasonally strong, a strong one for oracle heading into the print.

There was I know some chatter, some analysts were kind of worried just because of some of what they had seen from other enterprise software makers like sales force and work day.

Um But on, on that, on on this new news here, Larry Ellison is out with statement saying our multi cloud cooper operation with Microsoft expanded.

He says significantly in Q four as we agreed to work together to support open A I and chat GP T he goes on to say as this becomes available, it's going to, in his words, turbocharge our cloud database growth clearly and investors at least initially are reacting strongly.

The stock was already up about 20% year to date heading into this print attacking on about 8% initially after hours.

Yeah, and analysts who we've spoken to, some of them have said that this is sort of one of those names that while it's not in the big headlines for the hyper scaler, it's one of the companies that is indeed poised to benefit from some of these various generative A I um announcements.

And I should mention the stuff I I said at the beginning about Oracle partnerships now with Microsoft and Open A I on the one hand and then with Google on the other hand, those are are separate announcements.

So it had earnings and then it came out with separate releases talking about these other partnerships.

So again, one of those is that Oracle Microsoft and Open A I are gonna partner to extend the Azure A I platform to Oracle cloud infrastructure that will give open A I more capacity according to this release.

And then Oracle and Google cloud infrastructure are also going to have a partnership.

So it seems like all of this is sort of aimed at supercharging these A I capabilities if in my very layman's terms of what all of this means.

But it also means upside for the stock.

Yes, C for cats saying in Q three and Q four, oracle signed the largest sales contracts, our history driven.

She says by enormous demand for training A I at large language models in the Oracle cloud, she says in Q four alone, oracle signed over 30 A I sales contracts totaling more than 12.5 billion that she says, including one with open A I to train chat G BT in the Oracle cloud.

Investors seem plenty excited so far in the after hours.

Yes, they do.

And the stock, by the way, it's, it's not quite at a record, but it actually is kind of close to a record.

It was, it was, it was at a record back in March.

That record was 1 29 24.

So we'll see if that, I mean, it's trading above that right now.

All right.

Well, you know what Julie's still to come, we're gonna talk so much more about this.

We're gonna break down these oracle earnings a little more for the strategist as shares are soaring here after hours, stay tuned, more market domination over time.

That is coming up Oracle just reporting fourth quarter earnings as well as two separate A I partnerships.

Moments ago, the stock seems to be rising on those announcements with Google and with Microsoft and Open A I joining us now, Dan Morgan, senior portfolio manager at so Novas Trust.

So we got a two for or maybe even a three for, I guess, Dan with the earnings and then these partnership announcements.

Um, what's your big takeaway here?

What do you think is the most important thing that investors should be looking at from this news?

Well, Julie, it's kind of a mixed report because as you mentioned in the beginning, uh they missed on earnings, they missed on revenue.

The all important number, which is cloud services revenue, which as you mentioned, they missed slightly and we also saw the overall growth rate fall to about 20% compared to 25% in the third quarter.

But then they beat on their OC I number, their infrastructure cloud business, as you mentioned was a little bit better expected around 2 billion.

So it seems to me guys like the street is kind of pushing that aside and they're really just excited about these partnerships and anything that Oracle can do to, you know, move forward their cloud business, they're gonna get excited about it.

I mean, they generate about 38% of their revenues right now from cloud and Oracle's got a great opportunity if they can cross sell their huge mega database population, which is about 400,000 installs into their cloud business, it'd be huge.

So I think that's what everybody's excited about these partnerships.

Yeah.

And Dan, they're just talking to the execs getting a little commentary saying throughout fiscal 2025 they talk about continued strong A I demand to push Oracle sales to RPO even higher result in double digit revenue growth this fiscal year.

You know, Dan, for, for investors listening right now, you know, they're always thinking, looking for smart A I plays.

Do you consider Larry Ellison's company to be one of them, Dan?

You know, we do.

I mean, I look at Oracle as a dominant player database.

Uh They have about 42% market share.

They've been around forever.

Josh, I've been following Oracle for over 30 years and they've got into all the other hot businesses in the past and then they got into Cloud and, you know, they do have a bit of a distinct advantage over, let's say an alphabet or Google or GCP.

They're not quite as large, obviously as Aws with Amazon and Azer with Microsoft, but they're gaining, they're gaining share.

I mean, there's still a single digit market share but they're high, you know, single digits and they're moving up if they can continue to, like I say, take advantage of this great opportunity they have with this huge installation base.

And I think that's what the street sees and we also see Josh consistency.

Oracle is very consistent because of their customer base is heavily uh governmental.

They have very reoccurring, about 70% of their revenues are reoccurring.

So it's not as risky as, let's say, a high flying software company that's hoping to close that deal by the end of the quarter so they can beat numbers.

And t what, what is the role that that oracle is playing?

You know, when we hear about these new partnerships with the open A I for its infrastructure, what exactly like, where does it fit in?

That's a good question, Julie.

I, unfortunately, I don't have perfect answer, but I would expect because those are the leadership companies I mentioned Microsoft Azure and they're really gaining market share right now in the Aws.

The fact that they're able to put together these partnerships and be able to work together opposed to working against each other is huge.

So I think that's why the street was reacting so positively.

Uh to this announcement, I think Josh and Julie if we were to not have those announcements at the made with those partnerships with GCP and with Azer, um I think he might have gotten a little bit of a different reaction on this stock with this earnings report because of that myth that they had in cloud services.

Dan, I want to switch to here, big bit stick with the A I theme, Dan.

Um But interested, listen, Tim Cook took the stage yesterday and he kind of laid out his A I vision, his A I strategy and investors, Dan, they were plenty excited about that today.

That stock soared.

What did you think, Dan?

Were you as excited?

Well, it's interesting, Josh because you know, everybody was really negative on Apple compared to the other mega techs in terms of their A I strategy.

And we talked about that before in the show, you know, everybody was unveiling this, this great, you know, upcoming roadmap meta alphabet and really Apple was kind of being left behind.

And so we're waiting for this developer conference for Tim Cook and company to come out and make their announcement.

And there wasn't really too many big changes, Josh and Julie.

I mean, instead of hitting like a grand slam home run, uh like NVIDIA with a Blackwell chip or, you know, Microsoft uh buying Chad G BT, they're going to do it a little bit at a time with their current product mix and they outline that road map at the meeting.

So um I think it's a positive, it gets a new frame of thought surrounding apple stock in terms of their a initiatives and it's not the old rerun that we've heard that Apple's missing out.

Everybody's passing them up in A I, they definitely have a strategy and they laid that out and I think it was a positive the stock closed today at a record.

Dan as people kind of took a second look at it.

Would you add to an Apple position right now?

You know, Julie, we have massive position in Apple.

Uh We started buying it back in 2005 at a cost basis of like a dollar 23 with all the split adjusted time.

Um Yeah, I mean, we, I actually I, I added it to the buy list and I'm from the Bay area and I was out in California and I was seeing things really taking off at that time with their mp3 player.

This is for the iphone and we put it on the list.

So, you know, it is a stock that just about everybody holds, everybody has these huge concentrations in it because it's done so well.

So, you know, for, you know, obviously investors that have the right risk tolerance, right, objectives with something that we look at.

There's no doubt Josh and Julie, the stock is very extended right now based on a multiple basis.

If you're to look at, let's say the growth that we're expecting out of it, which is kind of single digit uh trades that are pretty high multiple.

Uh but you know, it's been on our list for a super long time.

It's been a tremendously successful stock for us.

And you know, it's, it's just been a big winner, so it's hard to turn your back to it.

So it's definitely something that is on the list and we will continue to look at to purchase for the right investor with the right objective and risk tolerance.

And last question uh on Apple, then you have been, you know, a long time shareholder there.

Did you think what Tim Cook announced yesterday?

You know, I I think one big question investors trying to figure out whether that kind of jumpstart some iphone meaningful iphone upgrade cycle.

Any thoughts there, Dan, that's a great question, Josh, because you know they're gonna come out in September with iphone 16, they have the new I OS 18 operating system which is laden with A I thing.

Uh A I features.

They also have the new revamp they're doing on the Siri uh they have the Gemini relationship with alphabet.

So is that enough to kind of gel that supercycle upgrade hit that we haven't really seen, right guys in the last couple new releases.

So I think it could, I think we could make a strong case that, you know, with enough built in A I features, people would want to go and, and go get that new iphone 16 and, and pose to just kind of waiting around like they have in the past with iphone 14 and iphone 15.

Dan.

Always great to have you.

Thanks for joining us.

Thank you time now for to watch Wednesday, June 12th.

Starting off with the fed, the FO MC uh began its June meeting today.

Its decision is coming in the afternoon while no rate cut is expected, we will be getting an updated dot plot fed chair, Jerome Powell will hold a news conference at 230 pm Eastern Yahoo.

Finance coverage will begin just before that at 2 p.m. Eastern tomorrow and just hours ahead of the decision will be getting the latest look at inflation.

The CP I print for me that the consumer price index will be coming out at 8:30 a.m. Eastern Economist forecasting core CP I will hold steady at 0.3%.

Well, overall CP I could drop to 0.1%.

And on the we're going to get reporting from Broadcom, Dave and Busters and Aurora Cannabis Broadcom announcing second quarter results after the close analysts expecting an in line, second quarter from the chip maker on the back of A I but for weakness in its non A I segments to offset some of those games and that will do it for today's market domination over time.

Be sure to come back tomorrow at 3 p.m. Eastern for all of your coverage leading up to and after the closing bell.

But don't go anywhere on the other side of the break.

It's asking for a trend, got you covered for the next half hour with the latest and greatest market moving stories so you can get ahead of the themes affecting your money.

Stay tuned.