Wall Street closed sharply lower on Thursday, dragged down by communications and discretionary stocks. Investor sentiment was guided by surging oil prices, escalating Middle East tensions and concerns over rising artificial intelligence (AI) spending despite strong quarterly earnings, dampening market confidence. All three benchmark indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) lost 506.93 points, or 1%, to close at 51,711.65. Nineteen components of the 30-stock index ended in the negative territory, while 11 ended in the positive.
The tech-heavy Nasdaq Composite fell 553.21 points, or 2.2%, to close at 25,137.69.
The S&P 500 slid 90.66 points, or 1.2%, to close at 7,408.30. Seven of the 11 broad sectors of the benchmark index closed in the red. The Communication Services Select Sector SPDR (XLC), the Consumer Discretionary Select Sector SPDR (XLY) and the Consumer Staples Select Sector SPDR (XLP) declined 5.2%, 5.1% and 1.1%, respectively, while the Industrials Select Sector SPDR (XLI) advanced 1.8%.
The fear gauge CBOE Volatility Index (VIX) increased 12.4% to 18.70. A total of 16.21 billion shares were traded on Thursday, lower than the last 20-session average of 18.51 billion. Decliners outnumbered advancers by a 2.99-to-1 ratio on the NYSE and by a 2.52-to-1 ratio on the Nasdaq.
Oil Surges Above $100 as Middle East Conflict Deepens
Oil prices climbed sharply on Thursday, piling pressure on global equity markets as fresh attacks and escalating geopolitical tensions heightened fears of prolonged supply disruptions. Brent crude settled above $100 a barrel for the first time since May, and U.S. benchmark WTI posted strong gains.
The rally followed claims by Yemen’s Tehran-backed Houthi militants that they attacked two Saudi oil tankers in the Red Sea. Markets also reacted after President Donald Trump threatened to bomb Iranian infrastructure, fueling concerns that the conflict could widen further.
Brent crude rose 7% to settle at $100.69 a barrel, its highest close since May 22, while WTI crude advanced 6.2% to $92.19, its strongest close since June 4.
Alphabet’s AI Spending Outlook Dampens Wall Street Mood
Alphabet Inc. GOOGL reported June-quarter earnings after the market closed on July 22. The tech behemoth reported earnings of $9.11 per share, widely surpassing the Zacks Consensus Estimate of $2.88, while revenue of $103.62 billion also topped expectations. Despite the strong results, its shares weighed on Wall Street after the Google parent raised its 2026 capital expenditure forecast to $195-$205 billion from $180-$190 billion. The higher AI investment plan intensified concerns about mounting spending by hyperscalers, overshadowing the earnings beat and dampening investor sentiment on Thursday.
Communications and Discretionary Stocks Drag Wall Street Lower
Communications services and consumer discretionary stocks came under heavy selling pressure on Thursday, dragging Wall Street lower as investors turned cautious amid mounting geopolitical tensions and rising energy prices.
The communications sector was hit by concerns over elevated AI spending despite strong quarterly earnings, while consumer discretionary shares weakened as soaring crude prices raised fears of higher inflation and reduced consumer spending. The risk-off mood prompted investors to trim exposure to growth-oriented sectors. Defensive sectors attracted demand as investors sought shelter from heightened market uncertainty.
Consequently, Roblox Corporation RBLX and Ford Motor Company F slumped 4.2% and 1.9%, respectively. Both currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
For the week ending July 18, initial jobless claims came in at 187,000, a decrease of 22,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 208,000 to 209,000. The 4-week moving average was 207,500, a decrease of 7,250 from the previous week’s revised average. The previous week’s average was revised up by 500 from 214,250 to 214,750.
Continuing claims for the week ending July 11 were 1,796,000, a decrease of 2,000 from the previous week’s revised level. The previous week’s level was revised down by 7,000 from 1,805,000 to 1,798,000. The 4-week moving average was 1,805,250, a decrease of 4,000 from the previous week’s revised average. The previous week’s average was revised down by 1,750 from 1,811,000 to 1,809,250.
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