- US stocks retreat as geopolitical tensions and Fed rate-hike expectations rise
- Oracle triggers investor concerns over AI financing plans
- Wall Street welcomes SpaceX
- US inflation stays above 2%-target for five years
Fed tightening and Middle East tensions weigh on US stocks
US stocks have experienced a volatile and eventful week, as investors have reacted to shifting geopolitical developments and expectations for Fed policy outlook. On Monday, investor sentiment improved, as investors returned to large technology companies and AI-related stocks. Optimism surrounding the long-term growth potential of AI continued to support investor interest in the technology sector.
As the week proceeded, rising concerns about geopolitical tensions in the Middle East began to weigh on US stocks. The re-escalating tensions contributed to higher oil prices and more anxiety that higher energy costs may result in Fed policy tightening. Markets are fully pricing in a rate hike of 25bps by December for the Fed. Wednesday marked one of the weakest trading sessions of the current year. The three major US stock indices retreated by almost 2%. A sell-off in AI and chip stocks significantly contributed to the decline. At the same time, rising oil prices, geopolitical uncertainty and stronger inflationary pressures dampened risk appetite.
In June so far, the S&P 500, Nasdaq Composite and Dow Jones stock indices have slipped by 4.1%, 6.7% and 2.2% respectively, while the volatility VIX index has increased by 35%. In 2026 so far, they have risen by 6.1%, 8.3% and 3.9% respectively, with the SOX index (Philadelphia Semiconductor index) climbing by 72.3%. Interestingly, the small-cap Russell 2000 index has outperformed the three major indices in 2026, as it has ascended by 14.3%. Today, US stock futures are edging higher, as the US and Iran were reported to carry on negotiating over a potential peace deal despite launching strikes. However, AI-related concerns are lingering after Oracle's earnings report.
Oracle exceeds expectations, but stock drops on AI financing plans
Oracle reported better-than-expected earnings and revenue for the fiscal fourth quarter on Wednesday. However, the stock dropped by 11% in extended trading as the company plans to raise more money to finance its AI projects. Revenue rose by 21% (YoY) to $19.2 billion, marginally above expectations of $19.1 billion. Earnings per share rose to $2.11, well above expectations of $1.95. The company maintained its previous revenue guidance of $90 billion for the 2027 fiscal year, while lifting its forecast of EPS.
However, it estimates to raise $40 billion through debt and equity financing, including a $20 billion share sale, after raising $43 billion in debt and $5 billion in equity in the 2026 fiscal year, a move that generated concerns to investors due to uncertainty about whether demand for AI could justify the new capital needs. For the 2026 fiscal year, capital expenditure jumped by 163% to $55.9 billion. Cloud infrastructure revenue jumped by 93% to $5.9 billion, while Amazon Web Services, the leader in the market, generated $37.5 billion in the same quarter.
SpaceX targets $1.75 trillion valuation
SpaceX is expected to hold its IPO this week, with Musk’s company targeting to raise $75 billion in a deal that would value the firm at $1.75 trillion. The details of the IPO show that SpaceX is offering a take-it-or-leave-it price of $135, rather than providing a range and then pricing the deal based on demand. The company generated $18.7 billion in revenue last year and recorded an operating loss of $4.2 billion.
Among the trillion-dollar companies, the smallest revenue is generated by Micron with $59 billion over the past year. The least profitable is Musk’s Tesla, with $3.9 billion net income. Interestingly, the company wants retail investors to receive roughly 30% of the shares sold, far more than the typical allocation of 10%. Pricing for the IPO is expected to come on Thursday, followed by the start of trading on Friday.
US inflation surges to three-year high
On Wednesday, US CPI data for May showed that inflation accelerated to 4.2% from 3.8% in April in line with expectations, reaching its highest level since April 2023. Energy costs jumped by 23.5% from 17.5% in April, reflecting the substantial shock caused by the Iran tensions. Core inflation, which excludes food and fuel costs, rose to 2.9% from 2.8% in April, matching expectations and reaching its highest level since September 2025.