S&P Closes in on a New Record After the Fed Cut and Oracle Drops after Earnings 12/10/25

0:02Live from the Nasdaq market today on a night when Tim small caps closed at a record high. And the Dow jumped nearly 500 points. This is Fast Money. Here's what's on tap tonight. A bad omen. Shares of Oracle dropping after the software giant missed revenue estimates for the latest quarter. What the results say about the state of the AI and tech trade. And the Fed in focus. Stocks taking a leg higher after the central bank cut rates at its last meeting of the year. But how many more cuts are coming in 2026? And what will it all mean for the markets? Plus, Uber sinks as Amazon ups its delivery game.

0:33Netflix hits seven-month lows amid the battle for Warner Brothers. And a rare bright spot in the staple space. What's got shares of Pepsi bubbling higher today? And how long can the caffeine high last? I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On our supersized desk tonight, because it is a very important day. Very big desk. Tim Seymour, Karen Feinemann, Dan Nathan, Guy Adami, and Michael Schumacher, Wells Fargo Securities Head of Macro Strategy. And we begin with the market reaction to the Fed's third and final rate cut of 2025. The committee cutting its benchmark lending rate by a quarter of a percent in a 9-3 vote, while also reiterating its forecast to just one rate cut next year.

1:12Stocks finishing near their best levels of the session. The S &P ending just shy of a record close, the Dow gaining nearly 500 points. NASDAQ adding a third of a percent to the small cap Russell 2000, set an all-time record close. Treasury's meantime firmer across the curve after the central bank said it will start buying$40 billion of T-bills this Friday. The yield on the two-year down more than seven basis points, while the benchmark 10-year pulled back after hitting its highest level since September 4th. For more on today's decision, let's get to senior economics reporter Steve Leisman, who is in Washington.

1:43Steve. Hey, Melissa. You have the Fed following through on an expected hawkish rate cut, reducing rates by a quarter point to the new range of 3.5 to 3.75. But signaling might be done cutting, at least for now. It appeared to buoy markets, however, with a more aggressive policy than expected for the balance sheet. On rates, the statement, what it did, it used the language that it had used in the past to signal a pause. And Fed Chair Jay Powell several times said policy is well positioned. We've now cut a total of 175 basis points. And as I mentioned, you know, we feel like where we're positioned now puts we're well positioned to wait and see how the economy evolves from here.

2:22Fed futures embrace that outlook pricing in just a 24 percent probability of a cut in January, 44 percent for March and a little bit more in April, a little bit more confidence as the year goes by. by the way, when a new Fed chair comes in in June. The vote count was nine for cutting, two against cutting, one for cutting 50 basis points. First time since 2019, we've had three descents. But the dot plot or forecast of future rate cuts was somewhat more hawkish. Six officials wanted no change in the Fed funds rate at this meeting. Seven want no change for next year from the current rate. The median, however, came out with one cut for next year and another one for 2027.

3:00More dovish was that balance sheet outlook that Melissa mentioned. It will begin on December 12th. The Fed going back in and buying securities sooner than the market expected, focused on bills, but potentially up to three-year maturities. And here's the one that really was a bit of a shocker, totaling$40 billion for at least several months, also more than expected. Powell insisting this is not quantitative easing, but the Fed maintaining the size of the balance sheet relative to the economy and providing liquidity during times of strong demand. Call it what you will. The markets seem to like it, Melissa.

3:32Call it what you will. I call it QE. I don't know. If you're basically enacting a measure that will push down rates further beyond the rate cut that you just voted on, that seems to me a form of QE. Yeah, I mean, I like the way you phrased that. In other words, judge it by its effect, not its intention. I think that's right. But I think what we're going to want to do is watch it over time. Does the size of the balance sheet actually grow in a way that's greater than the growth of the Fed's currency and other reserve liabilities that are out there? I think what's going to happen is you're going to get a flood for a couple of months and then it's supposed to drop off in April.

4:12We'll have to watch the management to see if this is quantitative easing in the sense of adding a lot of reserves to the system. Powell is going to tell you, hey, this is just reserve management. maintaining what they call an ample level of reserves. Yeah. So, Steve, it's Seymour. And part of this is understanding what the intention of this is. Maybe you just hit it. Maybe we can put it to bed. There have been some spikes and massive repo infusions over the last month, month and a half. Is this something to counter, you know, like so much for the end of QT? This. Do we need this here? I mean, I understand there have been between the government shutdown and whatnot reasons why we've seen a spike and concern around liquidity.

4:55But talk to me. Tim, I think you're raising some really important context that the Fed's change in its balance sheet and its balance sheet stance and doing so quicker than had been expected by the market is in response to some of the tightness we've seen essentially in the plumbing of the financial system. These repo rates have traded towards the high end. There's been some disruption out there. And I think the Fed was getting the signal from the market that it had brought reserves down too far and too much relative to what the market required to operate in a way that would allow it to maintain the funds rate where it wanted it to maintain it.

5:35So I think the context is important that the Fed is doing this in response to that tightness in the repo market. And now we'll see if the provision is out there. I will say for another day, there's a debate that the Fed could have done this differently in a way of not introducing the balance sheet, not increasing the balance sheet. A guy named Bill Nelson, former Fed guy, Kevin Warsh, other people had other ways to do this. But this is the way that Powell and the Powell Fed are running this system here, the ample reserve regime, which probably doesn't deserve but still requires an hour to talk about.

6:06Steve, it's Karen. Just to talk about it for a little bit more. As long as you like, I'll do it. Okay. Does the news of it itself help the situation and that maybe they really don't need to do it for very long? It could be that this is coming. And so banks should not, you know, husband their reserves. That's an idea that's out there. It could definitely help. You don't want to be talking about the repo market on TV. And I think that's a good metric, because if we're talking about it on TV, it means we're in trouble. Right. That's when we start to talk about. And that's it's not something you should be thinking about.

6:43It should be operating in the background where essentially a trillion dollars every day of stuff is repoed out there. It's like a trillion dollar daily trade in this in this stuff. And it goes seamlessly. But we've had some tightness in that market. It was the kind of thing that during the financial crisis we would look at every day. It was the kind of thing that kind of exploded. You might remember after the reciprocal tariffs were put in place and was a pretty good warning to the president that he needed to step back from those initial reciprocal tariffs. The market got very tight and maybe within a few days of things, this would be melting down, so to speak.

7:17So I think that's a good point, Karen, that maybe they've nipped this in the bud, providing enough liquidity out there. We'll have to see. There are some key points that are coming up. Watch when these big 10-year sales come from the Treasury. Watch year end. Watch tax day. The chair mentioned that April 15th next year. After April 15th, there's this demand for money to pay taxes. Then things should ease off. And that 40 billion number should ease off as well. Since we shouldn't be talking about repos on TV, can you talk to me about the message that Fed Chair Powell has about inflation? He says that inflation remains somewhat elevated relative to our 2 percent goal.

7:57But then he also said that something to the effect of further normalization will help us, will help the labor market, but also help the downward move of inflation after the pass through of the tariffs. Well, I think what they're waiting for is, and he said, there was this one point where a somewhat exasperated Powell said, if there are no further tariffs. So the idea that essentially these tariffs would pass through the system and the Fed could get back. I would say now I'll use a term that Paul McCullough used, sort of in the suburbs of neutral, not quite at neutral, maybe a little bit tight relative to the 3 percent neutral rate there.

8:36So it's possible there's more room to bring rates down in order to help the economy along, help the job market and not exacerbate the inflation problem. I think the Fed wants to see the data and wants to see what all this looks like on the other side. There's some interesting stuff coming down. I don't know if you guys are talking about this. I think you must have. The idea that there are big refunds coming next year. The average refund might be as much as$1 ,000 more than a year ago. That could help the economy. There's stuff in the BBB, big, beautiful bill about expensing that might pick up investment next year.

9:15So there's stuff the Fed chair wants to see. what's interesting right now, we got the employment cost index this morning. We'll have to watch this. It does not appear, and Powell talked about this, that the job market is going to be a source of inflation that the Fed has to worry about. And that's something I think they want to see when you look at the household report, the unemployment rate tells you about that kind of tightness out there. If that happens, we could go lower. But I still think the Fed wants to see things clear a little bit, the fog of having no data, the fog of how these tariffs are going to affect the economy.

9:49The Fed wants to see that stuff clear. And then it can make policy maybe head a little bit more towards neutral. You see that chart you have up there. I like that chart. Where would it want to be? Well, down towards 3%, maybe a little bit below that. Think of it this way. 3 % funds rate minus 2 % inflation gives you 1 % real. I think the Fed would be comfortable in that zone. Steve, thank you. Pleasure. Steve Leisman in Washington. We got to go straight to Michael on this. Thank you for being part of our extended desk on this very important day, final Fed day of the year. What did you make of the Fed's moves?

10:22Yeah, I disagree with Steve. I think it was dovish. Despite the, quote, fog of having no data, the Fed cut. What does that tell you? They want to cut some more, I think. Probably not in January, maybe not in March, but the door is open. So Powell could have said, we're done, which is what the Reserve Bank of Australia did a couple days ago. The Fed did not do that. So the Fed said, hey, look, we might do this again. And buying T-bills, that's a very dovish move. Equities ripped. You all saw that. I will say the bond market didn't react as much as I would have expected, given a fairly dovish response.

10:52Two-year Treasury yields down seven, eight basis points, something like that. I thought it could have been 15. But still, I would take it as a dovish sign. Do you also disagree with Steve? I understand what Steve's saying. Somewhere in the middle, because there's a lot to decipher here. But I'll say this. Come on, guys. Over here. No, no. I think in terms of the$40 billion, they're trying to put out a fire before it starts. They see the potential for one, and they're like, we're not going to let this get to that point, which I'm OK with. But I think you can make an argument this is bond bearish, and I'm on the bearish side.

11:21But this is definitely precious metals bullish, in my opinion. And I think if you look at the price action in some of the miners, the initial reaction was to sell off on the back of what they interpreted. And now the knee-jerk reaction is, wait a second. If we're going down this QE route, like you said, I mean, gold should continue to move. And I think that's my biggest takeaway. We're going to break protocol here because while I said goodbye to Steve, we'll bring Steve back in because Michael so decisively said that he disagreed with him. Oh, the rebuttal. Here we go. Yes, the rebuttal. You didn't know you had to do this either.

11:52No, this is news to me. I don't I did not say it wasn't dovish. I hope I don't know how you got that impression. And I said it was a hawkish cut in the sense that they suggested using a variety of language that they were not going to cut in January. And maybe the next cut was further down the road. But I don't think this was more hawkish. And I thought I also thought the balance sheet stuff was pretty dovish. So I just want to correct that if you misunderstood me. I think when you lead with hawkish, the natural interpretation I would have is it was hawkish. And I think versus market expectations, which were pretty bowled up on the hawkish side, the Fed didn't quite get there.

12:27So Powell wasn't sufficiently hawkish to placate the hawks out there in market land. When you look at the moves and yields over the last five, six days, I think they'd really gone a bit to one side, and he wasn't quite there. So I'd still go it wasn't particularly hawkish, meaning I thought it was dovish. Not screaming, but that way. Well, I think the one thing that would be interesting would be if you're so, if you think it's that dovish that you're now saying they're going again in January. Are you that dovish? No, no, we're not saying that at all. I think the door is open. So the market, in terms of a hawkish cut, what I would have labeled a hawkish cut is Powell says, no, we're effectively done.

13:02We're not going in Jan, not going in March. I'm going to pass the baton to some other lucky soul in May, and that person can deal with it. But I'm not going to do anything else. He didn't do that. So that's how I. Your hawkish bar was much higher. I think it is. That's probably the takeaway. Steve, we've got to let you go this time, for real. I'm going. You can't fire me. I quit. Thank you, Steve, as always. Dan, what's your take? Let's bring it back to repos. I'm just kidding. We're not supposed to talk about that on TV. You know, I take issue with the fact that the market ripped. I mean, we closed up 70 basis points.

13:32If you look at the intraday S &P from 2 o 'clock, I mean, it was kind of muted. You know, and then you look at yields. But small caps finished it at all time high. Yeah, your small caps did. But, you know, maybe that's a little bit of a catch up trade, Tim. I know you've been on it for three years, but it's back, baby. No, I just think that, you know, yields didn't move. The dollar was down a little bit. Bitcoin didn't really move. Like stuff that I was looking for, like some macro reactions, they just really didn't happen. And all that said, we are very near, you know, the all time highs in the S &P 500.

13:58It really feels like this is it. We get through these earnings this week and have a ball. What do you call a guy like a Santa Claus rally or something? Yeah, I use that term every year. Yeah. Mistletoe. One thing Powell said that I thought was interesting how he just said, you know, we are still committed to two percent and then moved on to something else. We're nowhere near two percent. Did he mean a two handle to something percent? Because we are, if that were the case, if they were still committed to 2%, we would have seen a lot more hawkish rhetoric. Unless he believes that the impact is solely because of tariffs and that there is a time at which that impact will roll off.

14:36So do you want to, you know, move monetary policy based on something? Exactly, based on transitory inflation. That was my take. I don't know. I think the Fed was influenced by the freshest data it had, which was this morning's employment cost index, which ECI at three and a half percent on wages is not that hot. And and and the implication from this report also is that a two percent target, you're not far off with all the productivity gains that the labor market can certainly be absorbed. And actually, some of the tariffs can be absorbed. And this gets you to a Fed that really should be on hold seemingly.

15:09It's funny, Michael, because you are you know, you've definitely been very adamant that you thought it was it was we're done, but that we're not done, we threw a lot of stuff out there. Didn't he say three times, we're going to wait and see? Does wait and see mean we're not done? Because when I heard that three times and he said it maybe more than three times, anytime he had a chance to say, we went today, but we're now going to wait to see how the economy responds. And that to me sounds like a Fed that is on hold and it sounded more hawkish. But I would interpret that as being a Fed that's taken the right stance.

15:45They've got tons of data coming in just next week, as a matter of fact. So why prejudge it? But at least he didn't say we're definitively done, which other central banks have done. So that was that was my read on it. What does this mean for the markets? I mean, as Dan had mentioned, we're just you know, we're still basically at all time highs. Yeah. And I guess when I say 70 basis points on the close, you know, you didn't have Meta, you didn't have Microsoft, you didn't have NVIDIA. Isn't that good? But you had 493. That's good. Equal weight outperformed. Sorry, because what I think was really extraordinary, the other part of where he was, this may have been not a hawkish cut.

16:20That was definitely expected. But this was absolutely a call where the Fed said the economy is in pretty solid shape. This was a growthy Fed today. And I think you saw the kind of a barbell in the market that you actually got. So, you know, your small caps, have a ball with your 1 percent position in small caps and whatever. I just think, by the way, to reiterate my view on small caps, it's not that small caps are a bad place to be. They've been a great place to be. I just think they get a disproportionate amount of attention for the amount of market cap and for the amount of exposure in people's portfolios.

16:53But discretionary retail materials, as Guy said, all rallied big, but so did semiconductors. So, I mean, all of those sectors were up more than 140 basis points today. That's a big market day. Yeah, I didn't mean that, you know, that the 493 versus what I'm saying is when they join the party, if they do join the party, I mean, Powell did mention on a couple of occasions, you know, the contribution of CapEx and what that means for the economy. And I just think that's important. Maybe these stocks are saying something different. Maybe, you know, these bands, you know, for the NVIDIA H200, maybe they released.

17:27You can have a ball. China, buy as many as you want. But maybe they're not buying it. You know what I mean? And maybe that's the sort of thing that puts some pressure on CapEx. Who knows? I just think we've gotten to a point where we've got to see some new models. Because I've got to tell you, ChatGPG5 did not light the world on fire. And I think some folks are thinking that some of the scaling laws that they're relying on, you know what I mean, to keep this thing going, maybe they're not as sound as a lot thought, though. And we should note that Oracle's down 2%. We'll get a little bit more on that in a bit.

17:52But the fact that the broader markets rallied today, and it wasn't the NVIDIAs of the world, and maybe we don't need that sort of CapEx, that Blackwell and Deep Sea can exist in China, et cetera. and the rest of the markets can still go higher. And, by the way, Powell did address the rise in the 10-year yield and said, well, maybe it's because it's reflecting growth out there in the economy. It's a growthy Fed, too. Right. It was a growthy Fed. Brought up tariffs as well. Yes, all those things, absolutely. I'll say this. To me, it's going to come down, not necessarily what the S &P does. How does the dollar react overnight tomorrow?

18:26What does the bond market do? I think the dollar sells off on the back of this, and I think gold rallies. I also think the bond market deteriorates from this as well. We'll see over the next 24 hours. All right. Meantime, let's get to Oracle. We did mention that 10 % move. Shares are at after hours lows. The company missed revenue estimates for the latest quarter. The company just giving CapEx guidance on its call. Seema Modi is here. She's been dialed in. She joins us with the details. I mean, this is all these people. This is like a party. We got the rest of us with the party. And, guys, we have new details just coming from the conference call.

18:55Capital expenditures, as you just pointed out, Melissa, to$12 billion. That's up from$8 billion the previous quarter. In terms of funding, right, We wanted more transparency on the company's ability to finance this mega data center build out. They say that they have a variety of sources available through the debt market, public and private debt market was mentioned. Executives also adding that there are financing options where customers can bring their own chips to be installed in their data centers. Suppliers who can lease their chips rather than sell them. Remember, when it comes to Oracle's role in AI cloud computing, their number one expense is graphic processing units.

19:28And unlike other hyperscalers, Oracle is even more dependent on NVIDIA. And that brings me to the comments that founder and CTO Larry Ellison made in the press release today, where he talked about chip neutrality and how this is going to be a big policy for Oracle going forward. Yes, continuing to buy GPUs from NVIDIA, but he also said that they'll be looking at other players as well. And we know that Oracle already has bought thousands of chips from AMD. There's also been talk about Google and Amazon, among others, when you look at where other hyperscalers are investing. So that was also significant.

20:02Going back to the road ahead, the remaining performance obligations for, that's the backlog of new cloud computing deals, that came in at$523 billion. That is up from the$455 billion that was announced last quarter. Remember, that specific metric is what sent shares higher by 36 percent, the biggest one-day pop we saw since 1992 in shares of Oracle. But again, the street seems to be sort of overlooking that number right now, focused on the financing options, a more definitive answer on what that could look like in the next three to six months. The call is ongoing. We still haven't heard from Ellison, who I imagine will address some of those questions.

20:39There is a lot to unpack. We're getting to the RPO number because that was what caused the stock to spike on the back of last earnings. And then we found out it was because of one customer. Do we have any clarity on who is behind this bump? Glad you mentioned that. And that was a narrative that the company has been trying to build in recent weeks, even on the investor day in this press release. And even on the call, they mentioned that there's Meta, there is NVIDIA. So they are trying to show that it's not just about OpenAI, which is that$300 billion five-year deal. There are other customers in the pipeline.

21:09But we want more details, and we'll get them. Yeah, we should note that NVIDIA shares are down 1.2 % on the back of this sort of slid along with Oracle down in the aftermarket session. Yeah, I think you framed it. I mean, she surrounded the trade, obviously. But if you go back to September 10th when they kind of released this number and everyone knew who it was, right? Let's be honest. They've been throwing around contracts all over the place as OpenAI. So you can talk about an RPO that's a half a trillion dollars, whatever you want. If they can't finance the bulldox, well, then they're not going to get the revenue, right?

21:38So that's what I think the market is calling BS on right now. And look at the stock. I mean, it's well below where it was the day they reported in September. So to me, I think the market is both the equity and the debt markets are saying they're not going to be able to do it. Yeah. I mean, the notion that they're going to increase spend by$4 billion quarter on quarter. But how do you do it when there's a spate of debt offerings in the market? I mean, the competition to raise money at this point is fierce. Right. And so you just get into this vicious cycle of the price of the project goes up because the price of the debt goes up as everyone's trying to tap the same market.

22:15Yeah. I mean, and you just get back into where we've often talked about with the company. We don't know anything about what really the RPO pricing is going to be. But what we do know is that their large language kind of AI model dynamics, the margins there, they've already said are going to be below the corporate average. I mean, there's nothing attractive about that business. Having said all that, I thought the setup for earnings was pretty good. And I actually thought it was going to bounce here. So I need to be clear. I mean, this was a stock that had rallied almost 17 percent into today. And it looked like we'd been level set.