* Indexes weak with Middle East, earnings adding pressure

* Oil prices surge, reviving worries about inflation

* Tesla tumbles after results, Alphabet falls after hiking

FY capex guidance

* Lockheed Martin ( LMT ) rallies after lifting 2026 forecasts

(Updates with preliminary closing prices)

By Sinéad Carew and Ragini Mathur

July 23 (Reuters) - Wall Street indexes closed lower on

Thursday with Nasdaq sinking more than 2% as the latest earnings

updates from large technology companies revived concerns about

heavy AI spending, while soaring oil prices amped up inflation

worries, lifting bond yields.

Losses were broad-based after investors were unimpressed by

second-quarter results from Alphabet and Tesla

, the first of the heavyweight "Magnificent Seven"

companies to report results this season.

Stocks also came under additional pressure as Brent crude

oil futures settled above$100 a barrelfor the first time since

May, and U.S. oil futures rose above $90.

Middle East hostilities fanned worries about global oil

supplies. The U.S. military launched another round of air

strikes on Iran, and Iran fired at neighboring Arab countries

that house U.S. bases. U.S. President Donald Trump vowed "major

military punishment" for Iran and Houthis, 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.

And 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 armor and the stocks are being sold off."

According to preliminary data, the S&P 500 lost 92.62

points, or 1.24%, to end at 7,408.53 points, while the Nasdaq

Composite lost 552.33 points, or 2.15%, to 25,138.57.

The Dow Jones Industrial Average fell 523.01 points, or

1.00%, to 51,695.57.

The S&P 500's 11 major industry sectors were a mixed bag

with strength in industrials where big gainers

included Lockheed Martin ( LMT ). Shares in the defense giant

rallied after it lifted 2026 sales and profit forecasts.

Shares of Google's parent, Alphabet, sank after it reported

higher spending plans while it also burned cash.

The stock's fall dragged the communication services

sector down. Consumer discretionary was

another big sector loser, with a hefty weight from Tesla, whose

shares tumbled after it reported negative free cash flow in the

second quarter for the first time in more than two years.

Wall Street's fear gauge, the CBOE Volatility Index

hit its highest level in nearly a month during the session.

With oil prices rising, inflation worries pushed U.S.

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.

The volatile Philadelphia semiconductor index was

down during the session with results due after the bell from

chip giant Intel ( INTC ). Shares in analog chip company Texas

Instruments ( TXN ) fell sharply despite forecasting quarterly

revenue above estimates.

However, shares in Thermo Fisher Scientific ( TMO ) rallied

after the medical equipment maker raised its annual profit

forecast and beat estimates for second-quarter results.