Mixed Trading in Asia After Yesterday’s Wall Street Selloff; Oracle Slides 8%

8:30 Asia’s trading is mixed this morning. The Nikkei closed up 0.1%, and in South Korea the Kospi is rising 0.3%. In China, however, prices are falling, with the Shanghai index down 0.3% and the Hang Seng weaker by 0.9%.

Wall Street closed deep in the red yesterday, amid Trump’s threat to strike Iran, alongside continued profit-taking in the chip sector. The tech-heavy Nasdaq fell about 2%, the S&P 500 lost about 1.6%, and the Dow Jones weakened by 1.9%. The SOXX ETF, which tracks chip stocks, lost more than 3%, with notable decliners including Nvidia, Micron, Marvell, Broadcom, AMD and others. It should be noted that last Friday, SOXX posted its sharpest daily drop in six years and plunged more than 10%. On Monday, it recovered and rose 5%, but later in the week returned to trading lower. The XLK ETF, which tracks the technology sector on Wall Street, also fell by more than 2%. Both are now in correction territory, meaning they have fallen more than 10% from their recent highs.

Technology and artificial intelligence stocks continue to draw intense attention and show high sensitivity to stretched valuations, as was clearly reflected in the earnings report of software and cloud giant Oracle. The company beat analyst forecasts in the fourth quarter of fiscal 2025 with adjusted earnings of $2.11 per share and revenue of $19.18 billion, and it also posted a striking jump in remaining performance obligations to $638 billion, a figure indicating strong demand for its AI infrastructure, including from OpenAI. However, a slight miss in cloud infrastructure revenue, which totaled $9.91 billion versus a forecast of $9.99 billion, was enough to trigger a wave of selling and send the stock down 8% in after-hours trading yesterday.

Shares of server company Super Micro Computer plunged more than 20% on Wall Street yesterday after it announced a $7 billion capital raise, wiping out about $6.5 billion in market value. According to the company’s official statement, the purpose of the plan is “to finance the purchase of components in order to fulfill the AI orders the company has received in recent weeks for its advanced AI servers.” The company, which designs and manufactures server and storage systems, said it has received orders worth $39 billion in recent weeks for its AI servers. According to a MarketWatch report, the company plans to issue new shares worth $1.25 billion and depositary receipts worth $3.75 billion, representing a proportional stake in the convertible preferred shares it recently issued. In addition, the company plans to use an at-the-market sales program, or ATM program, to sell common shares worth up to $2 billion, starting in the third quarter of 2026.

Just last week, Alphabet (Google) announced a massive $80 billion capital-raising plan to finance its expansion in AI, a move that renewed concerns among some investors about the enormous capital expenditures of companies operating in the artificial intelligence arena.

Sandisk shares eased slightly from their recent high, but since returning to trading on Nasdaq in February 2025, the stock has risen 47-fold. This week, two analysts raised their price targets for the stock again. Sandisk, founded by Eli Harari, is a memory chip maker and, like others in the sector, is benefiting from strong momentum due to heavy demand for AI infrastructure while supply remains constrained. At Bank of America, the price target was raised from $1,550 to $2,100, a 27.5% premium, with a Buy recommendation. The analysts said demand remains strong and they expect the average selling price to rise at least through the first half of 2027. At Cantor, the price target was raised from $1,800 to $2,900, a 76% premium, with an Overweight recommendation, alongside an upgrade for another company in the industry, Micron. Cantor believes the industry’s supply shortage will continue in 2027 and 2028.

Alongside the geopolitical tensions, the market attributed yesterday’s declines to several factors. Some analysts believe investors are making room in their portfolios for tomorrow’s SpaceX offering, which will be the largest initial public offering in history. Others think it is profit-taking after the unprecedented rally in chip stocks in recent times, since even after the recent pressure on these stocks, the SOXX ETF is still up more than 80% since the start of the year. Martha Norton, chief investment strategist at Empower Investments, told CNBC: “If we’re talking about the essence of what we’ve seen in recent weeks, it really centered on that memory and chip space that lifted the market. That was the real force behind everything, and it really ran so hard that it feels very close to toppy right now. So does that mean there is some kind of deterioration in the market’s fundamentals? I’m not so sure about that, but there definitely seems to be tense sentiment and we’re getting some kind of correction.”

U.S. bond markets are already pricing in a rate hike. The 10-year Treasury yield rose to more than 4.5%, and the two-year yield, which is considered more sensitive to short-term interest-rate changes, climbed to more than 4.13%, a more than one-year high, despite the Fed rate standing at 3.5% to 3.75%. In doing so, the U.S. bond market is sending a sharp message to the new Fed chair, Kevin Warsh, who is set to decide on interest rates next Wednesday, June 17. Before taking office, he has repeatedly hinted that monetary policy is already restraining economic activity and that there is room for easing in the future. Now, he faces a bond market signaling the opposite, that the Fed may be behind the curve in its fight against inflation.

In commodities and currencies, the dollar is strengthening globally, as the DXY index measuring its strength against major currencies rose 0.5% over the past week. Following heightened tensions between the U.S. and Iran and Trump’s threats to carry out further strikes against it, oil prices jumped more than 2% yesterday. This morning, oil prices continue to rise and are up 1%.

Jed Elbrauk, portfolio manager at Argent Capital Management, told CNBC: “The war story with Iran is of very significant importance. Investors may turn out to be right that there is nothing to fear, that Trump will handle it, that we will get a deal with Iran and that the Strait of Hormuz will open. But if not, it feels like oil prices will need to rise a lot. In this investment environment, it is impossible to feel comfortable.”

The U.S. consumer price index, published yesterday, rose 0.5% last month, in May, bringing the annual inflation rate to 4.2%, in line with earlier forecasts. This is the first time in three years that inflation has risen above 4%, mainly because of higher energy prices. However, the core index, excluding volatile food and energy prices, rose 0.2% in May, below analysts’ expectations of 0.3%, bringing annual inflation to 2.9%.

Ronen Menachem, chief economist at Mizrahi Tefahot, commented on the U.S. consumer price index and said that “today’s inflation data are the highest in three years. However, the energy component, which jumped by almost 4% in May alone, contributed 60% of the rise in the overall index. In general, over the past 12 months, the fuel component in its various forms has surged by no less than 40%. Therefore, although inflation rose in the bottom line, this is not a broad-based increase, but rather an unusual impact from one component. This also explains the gap between the rise in the overall index and the rise in the core index, which excludes energy and food components. By the way, the food component rose only 0.2%, less than the rise in the overall index, and it remains to be seen whether the increase in fuel prices and production inputs will have later effects in the next readings.”

Menachem added that “the more encouraging news comes from the housing component, which did rise 3.4% over the past 12 months, but this rate was lower than the rise in the overall index, also on a monthly basis, and in general there is a noticeable moderation in this component, which is the largest and most important in the entire index. The same is true of the services component, excluding energy. These are two service components, and their moderation makes inflation less ‘sticky’, which may indicate the cumulative effect of high interest rates in the U.S. economy. Another finding with a familiar local flavor is that airfare prices jumped 2.7% in May and, as in many places around the world, are pulling the overall index higher.”

“In the end, although the index was in line with expectations, overall it pointed to a high and broadening price environment, and together with Friday’s strong employment report, which also surprised to the upside and indicated strength in wages and employment, it will leave the Federal Reserve no choice but to keep interest rates unchanged and perhaps even consider a hike later this year. The market now assigns a 40% probability that rates will rise by a quarter point in October,” Menachem concluded.

It should be noted that today at 3:30 p.m., another key inflation figure in the U.S. will be published, the Producer Price Index for May, which measures the pace of price increases at the wholesale level. After April’s index jumped sharply and showed a monthly increase of 1.4%, the forecast for May is 0.7%. As with the consumer price index, a larger-than-expected increase could fuel concerns about a higher inflation environment for longer and further weaken the already slim expectations for interest-rate cuts in the U.S. in the foreseeable future.

In Europe, expectations are growing that the European Central Bank will raise rates to 2.25% today. At Swiss bank Pictet, it was estimated that the monetary council is expected to frame the move not as the start of a rate-hike cycle, “but as a recalibration intended to reaffirm its commitment to price stability.” Looking ahead, the Swiss bank says President Christine Lagarde is expected to keep all options open ahead of the next meetings. “A rate hike as a kind of ‘insurance’ has become close to consensus, but further monetary tightening poses greater risks to already weak growth and could face resistance from some dovish council members, especially in the absence of clear evidence of second-round effects,” the bank wrote.

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