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By Martin Baccardax

Federal Reserve Chairman Jerome Powell's answer to a crucial question on interest rates stoked big gains for stocks on Wednesday, but bigger concerns over a query put to executives at Oracle looked set to unwind nearly all of them.

The Fed lowered its benchmark borrowing rate for a third consecutive meeting, taking it to between 3.5% and 3.75% and forecast a further quarter-point reduction in 2026. Powell told reporters that risks to the central bank's dual mandate for full employment and steady prices were largely balanced but noted that delayed data from the 43-day U.S. government shutdown still will need to be assessed.

He did, however, push back on the idea that this could trigger a near-term rate hike, saying such a move "isn't anybody's base case at this point."

"The split vote shows the committee isn't fully unified, but Powell's tone suggests a bias toward further easing if needed," said Gina Bolvin, president of Bolvin Wealth Management Group.

"This is a Fed trying to guide the economy to a soft landing without oversteering," she added.

The dovish gloss to an otherwise hawkish rate cut, which included uncommon division among Fed officials and suggested further uncertainty when Powell's term ends in the spring, gave stocks a powerful boost into the end of the session, with the S&P 500 closing just 5 points shy of its all-time peak.

The euphoria didn't last, however.

Oracle, which has become increasingly representative of investor concerns over the pace of spending on artificial-intelligence infrastructure and the time it takes to convert that into profit and revenue gains, disappointed markets with a mixed set of fiscal second-quarter earnings after the closing bell Wednesday.

The tech and cloud giant also rattled the market's nerves with a 40% quarter-on-quarter increase in capital spending, which was pegged at around $12 billion, while forecasting a fiscal-year tally of $50 billion, some $15 billion more than Wall Street had expected.

Perhaps more importantly, co-CEO Clay Magouyrk wouldn't put a figure on the amount of money Oracle would need to borrow to fund its AI ambitions when directly asked by Deutsche Bank analyst Brad Zelnick.

"We've read quite a few that show an expectation of upwards of a $100 billion," Magouyrk said. "We expect we will need less, if not substantially less, than that amount."

Oracle shares tumbled 12% in premarket trading Thursday and looked set to open near the lowest levels in six months. Bigger AI names, such as Nvidia, Alphabet, and Microsoft also traded lower Thursday, dragging both the S&P 500 and the tech focused Nasdaq Composite into negative territory.

The Fed's supportive policies, which include a fresh round of Treasury bill purchases designed to shore up liquidity in the banking sector as well as its dovish bias on rates, likely will outweigh the market's immediate concerns over the strength of Oracle's balance sheet.

"Goldilocks is here," said Jeffrey Roach, chief economist for LPL Financial in Charlotte. "Fed forecasts are for higher growth, lower inflation, lower unemployment, and no change in the projected appropriate policy path for fed-funds rate."

But the mood heading into Thursday is decidedly cautious, with lower benchmark Treasury bond yields, a weaker U.S. dollar, and a pullback in risk-sensitive bitcoin.

"The AI trade is in a funk," Deepwater Asset Management's Gene Munster told CNBC late Wednesday. "And the question I'm asking is what's the timing as to when we're going to get out of that."

Investors are asking that as well.

Write to Martin Baccardax at martin.baccardax@barrons.com

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.

U.S. tech and AI-related stocks fall premarket as investors respond to Oracle's consensus misses for both earnings and AI spending. Though Oracle's losses are deeper premarket--down 11%--AI-focused stocks also drop. Cloud-computing provider CoreWeave falls 3.4%, while chip makers Nvidia and AMD slide 1.9% and 1.5%, respectively. Oracle's higher-than-expected AI outlay, paired with an earnings miss, prompted investor concerns over how and when profits from the AI boom will materialize. Other tech stocks have more modest falls, with Meta, Microsoft and Alphabet, all down around 0.7%-1% premarket. Futures for the tech-heavy Nasdaq fall 0.8%. (josephmichael.stonor@wsj.com)