Wall Street has closed lower as the latest earnings updates from large technology companies revived concerns about heavy AI spending. Soaring oil prices amped up inflation worries, lifting bond yields.
The S&P 500 fell more than 1% across the board after investors were unimpressed by second-quarter results from Alphabet and Tesla, the first two “Magnificent Seven” companies to report this season.
Oil and Middle East tensions add to the pressure
Stocks came under additional pressure as Brent crude oil futures settled above $US100 a barrel for the first time since May. US oil futures settled above $US92.
Intensifying Middle East hostilities fanned worries about global oil supplies.
The US military launched another round of air strikes on Iran. Iran fired at US bases in nearby countries.
US President Donald Trump vowed “major military punishment” for Iran and the Houthi militia after the Yemeni fighters struck two Saudi oil tankers in the Red Sea.
The resulting surge in oil prices prompted worries about inflation days before the next Federal Reserve policy meeting.
“Oil prices rising at this clip pose a meaningful macro and market risk,” said Matt Miskin, co-chief investment strategist at Manulife John Hancock Investments.
He added that low unemployment data would pressure the Fed to focus on fighting inflation.
He also pointed to the lack of enthusiasm, even for strong earnings reports as investors struggle to justify high valuations.
“The numbers in aggregate are great but many companies have had a story that’s caused the stock to fall,” said Miskin, pointing to worries about capital spending as one example.
“Any chink in the armour and the stocks are being sold off.”
How the indices and sectors finished
The Dow Jones Industrial Average fell 506.93 points, or 0.97%, to 51,711.65. The S&P 500 lost 90.66 points, or 1.21%, to 7,408.30. The Nasdaq Composite lost 553.21 points, or 2.15%, to 25,137.69.
The S&P 500’s 11 major industry sectors were a mixed bag with just four advancing on the day.
The biggest gainer was industrials, up 1.77% with boosts from defence stocks including Lockheed Martin and RTX.
Wall Street’s fear gauge, the CBOE Volatility Index finished up 2.06 points at 18.7, after earlier hitting 20.3. That was its highest level in almost a month.
With oil prices rising, inflation worries pushed US 10-year yields to their highest levels since early 2025.
However traders were still betting on a roughly 64% probability that the Fed would keep interest rates unchanged next week, according to CME Group’s FedWatch tool.
