Stocks Fall Sharply as Crude Oil Prices Soar and Alphabet Sparks AI Spending Concerns

The S&P 500 Index ($SPX) (SPY) today is down -1.34%, the Dow Jones Industrial Average ($DOWI) (DIA) is down -1.07%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -2.06%.  September E-mini S&P futures (ESU26) are down -1.43%, and September E-mini Nasdaq futures (NQU26) are down -2.25%.

Stock indexes are trading sharply lower today amid a double whammy of higher oil prices and a decline of more than -7% in Alphabet following its earnings report after Wednesday's close.  Alphabet raised its capital spending forecast for this year to $205 billion from $190 billion, spending more than double its 2025 capital spending and raising concern that the company will struggle to earn a sufficient return on its outsized AI investment.  Tesla is down more than -13% today after its earnings report late Wednesday also showed a surge in capital spending.

Meanwhile, WTI crude oil prices (CLU26) are up more than +6% today after the Iran-backed Houthis launched a missile and drone attack on two Saudi Arabian oil tankers in the Red Sea, expanding the oil disruptions beyond the Strait of Hormuz and threatening oil shipments in the Red Sea. Sep Brent crude oil prices (CBU26) are trading above $100 per barrel.  The Houthis have vowed to blockade shipping linked to Saudi Arabia and warned shipowners against calling at the nation's ports.  The move threatens Saudi oil exports from Yanbu, a Red Sea hub that the Saudi's are using to ship crude since the war brought shipping through the Strait of Hormuz to a near halt.  President Trump said Tuesday that if there is a blockade in the Red Sea, the US “will take care of it.”  Meanwhile, the US and Iran exchanged attacks for the 12th straight day, and the US maintained its blockade of Iranian oil shipments in the Persian Gulf. 

US weekly initial unemployment claims in the week ended July 18 fell by -22,000 to 187,000, which showed a stronger labor market than expectations for a slight increase to +210,000.  Continuing claims fell by -2,000 to 1.796 million, showing a stronger labor market than expectations for a rise to 1.809 million.

The Chicago Fed’s June National Activity Index rose to -0.02, which was weaker than the expected rise to zero from May’s revised -0.19.

The Kansas City Fed’s July manufacturing activity index fell by -2 points to 9, which was weaker than expectations for a 1-point increase to 12.

The outlook for strong Q2 earnings, which began in earnest this week, is a bullish factor for stocks.  Forecasts compiled by Bloomberg Intelligence suggest Q2 earnings may increase by +23%, close to Q1’s blowout earnings of +30%, which was more than double the +12% analysts had expected.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.  So far, earnings results have been positive as 89% of the S&P 500 companies that reported Q2 earnings results have beaten estimates, according to data compiled by Bloomberg. 

The markets are discounting a 36% chance of a +25 bp rate hike at the next FOMC meeting on July 28-29.

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -1.14%.  China's Shanghai Composite on Thursday closed up +0.25%.  Japan's Nikkei-225 Stock Average closed up +0.46%.

Interest Rates

September 10-year T-notes (ZNU6) today are down -11 ticks, and the 10-year T-note yield rose +5.5 bp to 4.710%.  Sep T-notes today tumbled to a 1.5-year nearest-futures low, and the 10-year T-note yield rose to a new 1.5-year high.  T-notes are trading lower on today’s sharp +6% rise in WTI crude oil prices, which pushed the 10-year breakeven inflation expectations rate up +2.3 bp to a 5-week high of 2.284%.  T-note prices were also undercut by today’s US unemployment claims report, which showed a stronger-than-expected labor market.  The Treasury will sell $21 billion of 10-year TIPS later today.

European government bond yields are trading higher.  The 10-year German bund yield is up +2.8 bp to 3.199%, edging to a new 15-year high.  The 10-year UK gilt yield is up +6.0 bp at 5.094%, posting a new 2-month high.

The ECB today left its key deposit rate unchanged at 2.25%, in line with market expectations.  The ECB said it left rates unchanged, awaiting further data to determine whether additional rate hikes are necessary to address the inflation outlook.  However, ECB President Christine Lagarde said, "Risks to the inflation outlook are to the upside." The markets are discounting a 93% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

The sharp declines in Alphabet (GOOGL)and Tesla (TSLA)after their earnings reports late Wednesday are dragging down other mega-cap tech stocks.  The rest of the Magnificent 7 are all trading lower, led by a decline of more than -5% in Amazon (AMZN) and a decline of more than -3% in Meta Platforms (META).

Software stocks are under pressure today, led by declines of more -4% in Atlassian (TEAM), Salesforce (CRM), and Oracle (ORCL).

Chipmakers are lower almost across the board, led by declines of more than -5% in Microchip Technology (MCHP), more than -4% in ON Semiconductor (ON), and more than -3% in Texas Instruments (TXN) and Qualcomm (QCOM).

Energy stocks and service providers are trading higher on today’s surge in oil prices.  ConocoPhillips (COP), Diamondback Energy (FANG), Exxon (XOM), Chevron (CVX), and Devon Energy (DVN) are all trading up more than +2%.

American Airlines (AAL) is down more than -7% after the company reduced its annual guidance and said it may show a loss in Q3 due to persistently high fuel prices.

T-Mobile (TMUS) is down about -6% after a disappointing earnings report.

Comcast (CMCSA) is down more than -2% after its Q2 earnings report showed a loss in broadband subscribers, although the company noted an improved outlook for its Peacock streaming platform.

Earnings Reports(7/23/2026)

Albertsons Cos Inc (ACI), Allegion plc (ALLE), American Airlines Group Inc (AAL), Ameriprise Financial Inc (AMP), Appfolio Inc (APPF), Blackstone Inc (BX), Boyd Gaming Corp (BYD), Cleveland-Cliffs Inc (CLF), Columbia Banking System Inc (COLB), Comcast Corp (CMCSA), Comfort Systems USA Inc (FIX), Deckers Outdoor Corp (DECK), Digital Realty Trust Inc (DLR), Dover Corp (DOV), Dow Inc (DOW), Edwards Lifesciences Corp (EW), First Citizens BancShares Inc/ (FCNCA), Freeport-McMoRan Inc (FCX), Honeywell International Inc (HON), Huntington Bancshares Inc/OH (HBAN), Intel Corp (INTC), Kinsale Capital Group Inc (KNSL), Lazard Inc (LAZ), Lockheed Martin Corp (LMT), Nasdaq Inc (NDAQ), Newmont Corp (NEM), Norfolk Southern Corp (NSC), NVR Inc (NVR), Old Republic International Cor (ORI), Ovintiv Inc (OVV), PG&E Corp (PCG), Pool Corp (POOL), Popular Inc (BPOP), Quest Diagnostics Inc (DGX), Rexford Industrial Realty Inc (REXR), RingCentral Inc (RNG), Robert Half Inc (RHI), Roper Technologies Inc (ROP), RTX Corp (RTX), Ryder System Inc (R), SLM Corp (SLM), Snap-on Inc (SNA), SOUTHSTATE BANK CORP (SSB), SS&C Technologies Holdings Inc (SSNC), Summit Therapeutics Inc (SMMT), Thermo Fisher Scientific Inc (TMO), T-Mobile US Inc (TMUS), Tractor Supply Co (TSCO), Union Pacific Corp (UNP), VeriSign Inc (VRSN), Viking Therapeutics Inc (VKTX), West Pharmaceutical Services Inc (WST).