A historic drop for Alphabet's stock dragged the US market lower on Thursday after the company behind Google and YouTube reported weaker growth for the latest quarter than analysts expected. The report underscored worries about whether all its huge investments in artificial intelligence technology will pay off.
The S&P 500 fell 0.3% for its first loss in four days, even though the wide majority of stocks rose within the index and across Wall Street. The Nasdaq composite tumbled 1.4%, while the Dow Jones Industrial Average dropped 132 points, or 0.3%.
Alphabet suffers record fall
Alphabet is one of the most influential stocks on Wall Street because it's one of the largest, and the Class A shares of its stock fell 12.6% for their worst day since they began trading more than 20 years ago. The tech giant had been under pressure to at least meet analysts' expectations for growth amid concerns about how much it's spending to invest in AI.
Alphabet said late on Wednesday that it burned through more cash during the latest quarter, according to a measure called free cash flow, after its purchases of property and equipment topped $US51 billion.
Worries are weighing on the entire AI industry following a frenzy to build data centres and fill them with AI chips. Not only are concerns high that the AI revolution may not produce as much profit and productivity as hoped, future spending on data centres is also under pressure because of how expensive it's become to borrow money to buy more chips.
Broader market mostly higher
Alphabet's drop overshadowed what would have otherwise been a good day for the US share market. Four out of every five stocks within the S&P 500 climbed, and the index would have been higher if not for Alphabet.
Many companies rallied after reporting stronger profits for the latest quarter than analysts expected, including KLA Corp. The company, whose equipment helps make semiconductors, rose 5.5%.
Expectations are high for profit growth broadly across US companies. That's what allowed the S&P 500 to set its record earlier this month despite high interest rates and other worries weighing on the share market.
All told, the S&P 500 fell 23.59 points to 7,720.39 on Thursday. The Dow Jones Industrial Average dropped 132.54 to 52,342.56, and the Nasdaq composite tumbled 365.13 to 26,184.72.
Treasury bonds yields ease
In the bond market, Treasury yields eased following several mixed reports on the US economy.
The overall economy's growth may have accelerated more during the latest quarter than economists expected, thanks to spending by US consumers and businesses investing in AI, according to a preliminary report. But Americans' growth in incomes was weaker in September than economists expected, while a measure of inflation worsened.
Fewer US workers applied for unemployment benefits last week, meanwhile, which could indicate few layoffs across the country.
Following the jumble of reports, the yield on the 10-year Treasury fell to 4.94% from 5.05% late on Wednesday. It's been generally pulling back since it topped 5.30% earlier this month and touched its highest level since 2002.
Helping to drag yields lower on Thursday was a drop in oil prices. The price for a barrel of Brent crude oil fell 0.8% to $US110.80.
Europe rises, Asia mixed
On global markets, indices rose in Europe after the European Central Bank held interest rates steady. The bank's president, Christine Lagarde, also said she will resign in February, nine months before the end of her term.
In Asia, indices were mixed. South Korea's Kospi fell 1.2% due to a drop for market heavyweight Samsung Electronics, which sank 4.1% even though it reported a jump in profit.
