Thursday was one of those days where everything that could go wrong for stocks did. Oil prices spiked above $100 a barrel, bond yields hit new highs, and two of the market's most closely watched earnings reports — from Alphabet (GOOGL) and Tesla (TSLA) — left investors questioning whether the AI spending boom is getting out of hand. By the close, the S&P 500 was down 1.2%, the Dow had shed about 498 points, and the Nasdaq 100 had dropped 1.9%.
The trigger for the oil move was geopolitical. President Donald Trump warned that "major military punishment will be inflicted upon Iran" if its Houthi proxies again fire on tankers, after two Saudi Arabian vessels were hit overnight. That sent Brent crude surging 6.7% to $100.38 a barrel, its highest since early June, and West Texas Intermediate jumping 6.3% to $92.27. It was the fifth straight session of gains for oil.
The yield on the 10-year Treasury note rose for a fourth straight session to 4.71%, its highest since January 2025. The combination of surging fuel costs and a 57-year low in initial jobless claims fed expectations that the Federal Reserve will need to tighten further. Markets are now pricing a better-than-33% chance of a rate hike next week, with the odds of a September increase above 78%, up from 61% a day earlier.
The Cboe Volatility Index jumped toward 20 as hedging demand picked up. The damage was concentrated in megacap technology, with the Magnificent Seven bearing the brunt.
Alphabet sank 6.6% after doubling its capital-expenditure forecast to $205 billion for this year. The company's quarterly report was otherwise strong, but investors zeroed in on the spending — reigniting concerns that AI infrastructure spending is becoming unsustainable. Tesla tumbled 13% toward a one-year low after reporting lower profits despite a strong stretch for the broader EV sector. Amazon (AMZN) fell 4.5%, Meta (META) lost 4.1%, and Microsoft (MSFT) slid 2.5%.
Gold slipped 2% to around $4,048 an ounce as a stronger dollar and rising real yields pressured the metal.
Thursday's Performance In Major U.S. Indices
According to market data:
- The Vanguard S&P 500 ETF (VOO) fell 1.2%.
- The SPDR Dow Jones Industrial Average ETF Trust (DIA) slid 0.9%.
- The Invesco QQQ Trust (QQQ) dropped 1.9%.
- The iShares Russell 2000 ETF (IWM) declined 0.9%.
Defense and Energy Dodge the Selloff As Alphabet, Tesla Gut Big Tech
The Industrials Select Sector SPDR Fund (XLI) led the market, rising 1.9% on a wave of well-received earnings, while the Health Care Select Sector SPDR Fund (XLV) and the Energy Select Sector SPDR Fund (XLE) both added about 1.1%, the latter buoyed by the oil spike. XLE has now gained nearly 13% month-to-date, the strongest of any sector.
The damage was concentrated in growth. The Consumer Discretionary Select Sector SPDR Fund (XLY) sank 4.4% under the weight of Tesla and Amazon, and the Communication Services Select Sector SPDR Fund (XLC) fell 3% on Alphabet's slide, while the Technology Select Sector SPDR Fund (XLK) eased 0.9%.
Among industry funds, the U.S. Global Jets ETF (JETS) dropped 3.1% as higher fuel costs hit carriers, and the VanEck Gold Miners ETF (GDX) fell 2.6% alongside bullion. The First Trust Dow Jones Internet Index Fund (FDN) and the SPDR S&P Retail ETF (XRT) each lost roughly 2.6%.
Industrial earnings drove the day's biggest winners. United Rentals (URI) jumped nearly 12% after record second-quarter results, with adjusted EPS of $12.76 topping the $11.44 consensus and management raising full-year revenue guidance to $17.65 billion. Allegion plc (ALLE) rose 12.7% after adjusted EPS of $2.40 beat by 8.3% on 12.7% revenue growth and a raised outlook. Lockheed Martin (LMT) climbed 11.4% after posting second quarter EPS of $7.94 versus $7.20 expected, revenue of $20.1 billion and a lifted full-year sales forecast — a beat amplified by the geopolitical backdrop.
Cleveland-Cliffs (CLF) soared 18.5%, the Russell 1000's top gainer, after second-quarter revenue of $5.2 billion beat estimates, adjusted EBITDA tripled to $286 million and the steelmaker guided to record second-half earnings. Medpace Holdings (MEDP) surged 14.3% on 17.2% revenue growth to $707.3 million and a raised full-year EPS forecast, and Thermo Fisher Scientific (TMO) rose 9.6% after its own beat.
On the downside, Albertsons Companies (ACI) plunged 23.9%, the worst performer in the Russell 1000, after slashing its fiscal 2026 adjusted EPS outlook to $1.75-$1.85 from $2.22-$2.32 and missing quarterly estimates, with management citing a "more cautious consumer" and softer grocery trends. Molina Healthcare (MOH) sank 12.1% as full-year revenue guidance of roughly $42 billion landed about 5% below estimates, overshadowing a second-quarter earnings beat, amid industrywide medical-cost worries.
QuantumScape (QS) dropped nearly 14.6% in a reaction to its second-quarter report; the battery developer narrowed its loss to $0.16 per share and touted an expansion into AI data centers and defense, but the shares extended a steep recent decline. American Airlines (AAL) fell 8.2% as the oil surge hammered carriers, while capital-markets names Goldman Sachs (GS) and Robinhood Markets (HOOD) each dropped more than 3%.
