U.S. stocks took another hammering tied to renewed tensions in the Gulf region, questions over the fate of the artificial intelligence trade, and faster inflation metrics that could stoke Federal Reserve rate hikes.
None of those conditions has changed in any meaningful way, but there is optimism for a recovery as investors head into a key two-day stretch that will include the debut of SpaceX's $1.8 trillion IPO on Friday.
How they will hold up after that remains anyone's guess.
The S&P 500 has tumbled more than 3.3% over the past five days, closing Wednesday at the lowest level since May 5, paced by big declines in tech.
SpaceX, meanwhile, has garnered around $300 billion of interest for its $75 billion IPO, a level that suggests good, but not staggering, interest in the biggest stock listing ever.
Short seller Jim Chanos said the valuation, which could approach $2 trillion, was based on "hopes and dreams" for a company that hasn't turned a profit and generated less than $20 billion in revenue last year.
"Markets put a premium on promises," he told an event in New York City on Wednesday, adding that bear markets "put a discount on reality."
Stocks are still likely rising on promises, with the S&P 500 up 14% from its late March nadir, and 6% higher on the year.
But the risks are mounting.
The U.S.-Iran war shows little sign of ending, inflation pressures are likely to stay elevated well into the end of the year, and the labor market could crack under the pressure of AI-related job cuts.
Hopes and dreams have taken markets this far. Reality will decide where they go next.
-- Martin Baccardax
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Oracle's Guidance Overshadows Growth From the Cloud
Oracle was another case of meeting or beating expectations but failing to deliver an out-of-the-park outlook. While the cloud infrastructure business is expanding quickly, investors are tied to the narrative that AI will drive a stake through the user-based subscription model, and this quarter didn't counter that.
-- Oracle reported adjusted fourth-quarter earnings of $2.11 a share and
revenue of $19.2 billion, up 12%, beating forecasts. But revenue guidance
for the first quarter was a little short of consensus, and the annual
sales outlook is unchanged at $90 billion. The stock fell 6%.
-- Oracle Cloud Infrastructure, which rents out AI servers over the internet,
was again the star. Sales jumped 93% from a year earlier, to $5.8 billion,
and the backlog rose $85 billion to a record $638 billion. But legacy
software sales dropped 2%, and cloud software also underperformed.
-- Half of the backlog is a single multiyear contract with OpenAI. This and
other cloud deals are predicated on continued exponential growth of
demand for AI cloud computing over the next four years -- particularly at
OpenAI -- and that's far from guaranteed.
-- Capital expenditures for the 2027 fiscal year are projected at $70
billion, plus another $20 billion to $25 billion paid directly by
customers. In fiscal 2026, Oracle's capex was $56 billion, up from $21
billion the year before. Oracle also said it would raise another $40
billion in fiscal 2027.
What's Next: In fiscal 2030, the company expects Oracle Cloud Infrastructure revenue to rise to $166 billion, about three-quarters of total sales, which would transform it from a legacy software company into an AI infrastructure company.
-- Adam Levine
May's 4.2% Inflation Could Keep Fed on 'Prolonged Hold'
May inflation rose by an eye-watering 4.2% annual rate, but it could mark a peak for the consumer price index. It could also keep Federal Reserve policymakers on "prolonged hold" for most of the year, said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
-- The probability that Fed officials will raise interest rates at their
June and July Federal Open Market Committee meetings dipped below 2%
after May's CPI data was released, according to CME FedWatch.
-- Core inflation increased 0.2% in May, slowing from April's 0.4% gain, but
still pushed up core annual inflation by 2.9%. Fed officials are expected
to keep interest rates unchanged in coming months while they determine if
price growth is becoming entrenched enough to warrant hikes.
-- Rising inflation is making for an unwelcome handoff to new Fed Chairman
Kevin Warsh, says Olu Sonola, Fitch Ratings' head of U.S. economics. Low
supply chain inventories could cause a "secondary bump in prices over the
summer, as inventories are replenished," KPMG Chief Economist Diane Swonk
said.
-- EY-Parthenon Chief Economist Gregory Daco predicts that CPI inflation
will remain above 4% in June, while core inflation approaches 3% -- far
above the Fed's 2% target. The risk of more persistent inflation remains
"salient," Daco says, every day the war continues and the Strait of
Hormuz remains closed.
What's Next: Social Security's 2027 cost-of-living adjustment is projected to be 4.7%, up from last month's projection of 4.2%, according to calculations from Mary Johnson, an independent Social Security and Medicare policy analyst. The Social Security Administration will announce the actual adjustment in October.
-- Megan Leonhardt, Elizabeth O'Brien, and Janet H. Cho
SpaceX Stock Gets Its First Analyst as IPO Approaches
SpaceX stock isn't even trading yet, but it did receive its first Wall Street coverage. It isn't an official Buy rating, but it's still a positive development in the run-up to the rocket and AI company's blockbuster initial public offering.
-- New Street Research analyst Pierre Ferragu launched coverage of SpaceX
with no rating and a $165 price target on Wednesday evening. Having no
rating seems appropriate -- investors know the IPO is supposed to price
at $135, but they have no idea where shares will trade on Friday.
-- Still, $165 is up about 22% from the IPO price and seems to justify
SpaceX's massive $1.8 trillion IPO valuation. Ferragu's price corresponds
to a roughly $2.3 trillion equity value.
-- Ferragu sees 2030 sales of $195 billion in revenue and operating profit
of $65 billion, according to ratings aggregators. New Street didn't
immediately respond to a request for a copy of its initiation report.
-- That values SpaceX at about 35 times estimated 2030 operating profit,
making some assumptions for debt and cash generation. In comparison,
Google parent Alphabet -- another company investing heavily in AI --
trades for about 13 times 2030 operating profit estimates.
What's Next: It's a premium valuation, but SpaceX will be growing faster than Alphabet in 2030, according to New Street. Embedded in the valuation is $650 billion for Starlink products and $575 billion for AI. If things go well for SpaceX, Ferragu sees shares worth $330.
-- Al Root and George Glover
There's a New Stock to Play the AI Power Boom
Despite the hoopla surrounding this week's SpaceX IPO, there was a newly-listed power company called ERock that also debuted. The maker of natural gas generators for data centers, utilities, and commercial and industrial companies raised $600 million but fell 13% on its first day of trading amid a broad market rout.
-- Houston-based ERock priced in the middle of its expected range at $21.50
a share for a valuation of $5.9 billion. Its equipment can be placed
Lego-like into power systems of various sizes on site at data centers and
other large businesses. Customers include Meta Platforms, Microsoft, and
Foxconn.
-- The generators can be backup power, or temporary power while data centers
wait to be connected to the larger electrical grid. Given the yearslong
waiting times to be connected in states like Texas and Pennsylvania,
these kinds of systems have become increasingly popular at data centers.
-- Caterpillar, Generac, and Cummins also make portable power systems. ERock
CEO John Carrington told Barron's that its systems are designed to be
quieter and to produce lower emissions than standard diesel and gas
generators, potentially making them more palatable to communities that
have worried about those issues.
-- ERock's valuation looks lofty given its latest annual results. It
reported a $59 million loss on $183 million in revenue in 2025 -- meaning
its stock is trading at 32 times its latest annual sales at the IPO
price. Caterpillar, by contrast, trades at six times its 2025 sales.
What's Next: The company says its backlog was worth $1.3 billion as of March 31. Carrington says ERock will be able to produce 1.2 gigawatts worth of engines and generators annually by the end of this year -- more than its entire current installed base of about one gigawatt.
-- Avi Salzman
Hollywood Horror Show: Gen Z Directors from YouTube
Two recent horror movies directed by viral YouTube sensations are outperforming big-budget franchise films at the box office this summer. Movie industry watchers say their success shows that audiences are hungry for imaginative, unpredictable storytelling from fresh faces, rather than the big studios' tired sequels and retreads.
-- Obsession, a dark thriller about a socially awkward hopeless romantic
aiming to win over his crush's heart, has sold more than $156.1 million
in domestic ticket sales and $229.4 million worldwide over the past four
weekends. It was distributed by Focus Features.
-- A24's Backrooms, about a therapy patient who disappears into a dimension
beyond reality, has grossed more than $138.7 million in domestic box
office and $216.3 million worldwide over its first two weekends. Both
movies were made for a fraction of what major studios usually spend.
-- Backrooms' director and co-writer Kane Parsons, 20, is the youngest
director ever to have a film debut at the top, and Obsession's director
Curry Barker is only 26. Their films have contributed about one-fifth of
the summer's $1.346 billion domestic box office haul so far, Rentrak's
head of marketplace trends Paul Dergarabedian said.
-- Barron's Investor Circle says Cinemark Holdings, third largest U.S. movie
theater operator after AMC and Regal Cinemas, is poised to benefit from
this year's box office. Domestic ticket sales are nearly $4 billion
through June 7, and Deutsche Bank says 2026 sales could hit $10 billion.
What's Next: Hollywood's big studios aren't abandoning a slate of big-budget summer features. Universal's Steven Spielberg-directed Disclosure Day opens Friday; Walt Disney's Toy Story 5 opens June 19; Warner Bros.' Supergirl opens June 26; and Universal's Minions & Monsters opens July 1.
-- Janet H. Cho and Dan Victor
-- Newsletter edited by Liz Moyer, Patrick O'Donnell, Rupert Steiner
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 11, 2026 06:36 ET (10:36 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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