US STOCKS-Dow, S&P 500 post record closes; Oracle drags on Nasdaq

By Sinéad Carew and Johann M Cherian

Dec 11 (Reuters) - The S&P 500 and the Dow boasted record closing highs on Thursday as investors favored financial stocks after a Federal Reserve policy update that was less hawkish than expected while the tech-heavy Nasdaq Composite underperformed as Oracle's financial update made investors wary of artificial intelligence bets.

Oracle ORCL.N shares tumbled after the company's quarterly forecasts fell short of analysts' estimates and it warned that annual spending would run $15 billion higher than previously planned, stoking fears that its big push into AI cloud computing was burning cash.

The cost of insuring Oracle debt against default surged as investors fear that Oracle's heavy reliance on debt financing could fuel an AI bubble similar to the dotcom bust of the early 2000s.

While this helped drag other technology names lower, the Dow rallied along with the Russell 2000 .RUT small-cap index and the S&P 500 value index .IVX outperformed the growth index .IGX during Thursday's trading session.

"The name of the game is market rotation. We're seeing small caps, the Dow and cyclicals all start to do better in anticipation of a reacceleration of global growth," said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments.

Investors also continued to digest the U.S. central bank's update from Wednesday, when the Fed lowered borrowing costs by 25 basis points and Chair Jerome Powell signaled a pause on further easing. However, investors were relieved that the Fed still had two rate cuts on its dot plot as it balanced still-elevated inflation with signs of labor market weakness.

Mark Malek, CIO at Siebert Financial, saw a tailwind in Thursday's market from the Fed meeting and Powell's commentary.

"Clearly, the market was tempering itself for a more hawkish cut. Most of us were certainly anticipating Chairman Powell to come out of the gate with a little bit more of a negative tone," he said, adding that the Fed's focus on employment as "something that they have to watch carefully" was notable.

As if to illustrate that point, Thursday's data from the Labor Department showed jobless claims rose to 236,000 for the week ending December 6, compared with estimates of 220,000.

According to preliminary data, the S&P 500 .SPX gained 14.34 points, or 0.21%, to end at 6,902.19 points, while the Nasdaq Composite .IXIC lost 60.30 points, or 0.25%, to 23,597.26. The Dow Jones Industrial Average .DJI rose 651.37 points, or 1.36%, to 48,709.12.

Communications services .SPLRCL and technology stocks .SPLRCT fell along with the Philadelphia Semiconductor Index .SOX during the session while the strongest gainers included materials .SPLRCM and financials .SPSY.

Broadcom AVGO.O shares fell ahead of its closely watched earnings report due after the closing bell.

The blue-chip Dow .DJI hit an intraday record high with gains in financial stocks.

Visa V.N rose along with other payment companies and JP Morgan JPM.N and Goldman Sachs GS.N also rallied.

Walt Disney shares rose after the company announced a $1 billion equity investment in OpenAI, with the announcement potentially easing some concerns about the AI space, according to Siebert's Malek.