Dow, S&P 500, Nasdaq fall after back-to-back losses, jobless claims dip

Oracle (ORCL) shares fell more than 4% Thursday as Alex Haissl, an analyst with investing firm Rothschild & Co Redburn, initiated coverage of the stock with a Sell rating.

Haissl said Oracle’s recent five-year revenue guidance for its cloud business (OCI) that sent the stock soaring is a risk, writing that “the market is already pricing in a risky blue-sky scenario that is unlikely to materialise,” per Bloomberg. He set a $175 price target on the stock, while shares traded around $297 on Thursday.

The decline in Oracle shares follows a nearly 2% dip from the previous trading session as the software giant sold $18 billion US investment-grade bonds.

Oracle’s bond sale came as the rising AI cloud firm rushes to build AI infrastructure for its clients, which range from OpenAI (OPAI.PVT) and Meta (META) to Elon Musk’s xAI (XAAI.PVT). As of this summer, Oracle was leading a record data center leasing pipeline in the US as tech giants go all in on AI infrastructure, according to TD Cowen analysts.

Earlier this week, Oracle was named as an investor to take part in the US-China TikTok deal, and the company also named two new co-CEOs in an executive leadership shake-up.

IBM (IBM) shares rose over 3% Thursday as its customer HSBC (HSBC) said it has improved its ability to predict market behavior when using IBM’s quantum computers.

The London-based bank said it has integrated IBM’s Quantum Heron — its latest quantum chip — with classical and AI computers.

“By using quantum computers to model the European market at different points in time, and feed better data to its AI workflow, HSBC saw a 34 percent reduction in the errors made by its algorithm,” a spokesperson for IBM told Yahoo Finance.

HSBC claims this is the first empirical evidence of quantum computers delivering measurable value for a real-world financial services problem.

“This is a ground-breaking world-first in bond trading,” HSBC ‘s head of quantum technologies, Philip Intallura, said in a statement. “It means we now have a tangible example of how today’s quantum computers could solve a real-world business problem at scale.

US stocks fell at the open on Thursday, extending declines after two consecutive days of losses.

The Dow Jones Industrial Average (^DJI) dropped about 0.3%, and the S&P 500 (^GSPC) lost 0.6%. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) sank 0.9%.

The declines come as fresh data from the US Department of Labor showed jobless claims unexpectedly falling last week, complicating the narrative of a weakening labor market that has been fueling the case for further interest rate cuts from the Federal Reserve.

Yahoo Finance’s Brooke DiPalma reports:

Read the full story here.

Jobless claims in the US unexpectedly fell to 218,000 in the week that ended Sept. 20 from 232,000 the previous week, according to data from the Department of Labor released Thursday morning.

The 218,000 initial unemployment insurance claims were also lower than the 221,000 claims in the same week last year.

Economists tracked by Bloomberg had expected jobless claims to rise to 233,000 last week amid widening cracks in the labor market. Those cracks have featured heavily in discussions over the Fed’s path to interest rate easing, as officials on the central bank’s board of governors have expressed dissenting opinions over such rate cuts moving forward.

The White House budget office directed federal agencies to devise plans to permanently reduce their workforces if the government shuts down next week, raising the stakes of an outcome that looks increasingly likely by the day.

Politico reports that the White House memo targets “employees who work for programs that are not legally required to continue.”

More:

The shutdown, set for 12:01 a.m. next Wednesday, represents an increasingly present threat to markets. President Trump this week scrapped a planned meeting with Democrats, who are seeking an extension of healthcare subsidies under the Affordable Care Act to be included in a spending bill.

Reuters has a good explainer on how shutdowns affect markets.

Here’s a look at some of the top stocks trending in premarket trading:

Intel (INTC) stock rose more than 3% in premarket trading on Thursday following news it had approached Apple (AAPL) about securing investment. Nvidia (NVDA) announced this month it will invest $5 billion in Intel.

Hertz (HTZ) shares jumped 4% before the bell after announcing it will raise capital by selling $250 million exchangeable senior notes.

Qualcomm (QCOM) stock fell 1% in premarket trading on Thursday. The group announced a series of new chips for PCs and phones the day prior.

As a former analyst, I love gutsy calls on stocks. My vibe was often to go against the grain where it made sense. Sometimes it worked, sometimes it didn’t — it was fun either way.

I have to give Redburn’s Alex Haissl a shout-out this morning for dropping a Sell rating on one of the hottest stocks of the year, Oracle (ORCL). Haissl makes a compelling case to take profits in Oracle, in a new 59-page report shared with me.

Here’s his overall thesis:

Haissl slapped Oracle with a $175 price target, assuming 42% downside from current levels.