* Indexes down: Dow 1%, S&P 500 1.4%, Nasdaq 2.4%
* Oil surge reignites inflation worries
* Alphabet falls after hiking FY capex guidance
* Lockheed Martin ( LMT ) gains after lifting 2026 forecasts
(Updates throughout)
By Ragini Mathur and Avinash P
July 23 (Reuters) - U.S. stocks fell to multi-week lows on
Thursday, as disappointing early Big Tech earnings revived
concerns about heavy AI spending, while another jump in oil
prices added to inflation worries.
The tech-heavy Nasdaq led losses, briefly hitting its lowest
level in over two months and falling more than 7% below its
early-June record high. The S&P 500 and the Dow also touched
about one-month lows.
Second-quarter results from Alphabet and Tesla
, the first of the so-called "Magnificent Seven" megacap
companies to report this season, failed to impress investors.
"The concern about spending among these larger technology
companies has been brewing for a while," said Chris O'Keefe,
managing director and lead portfolio manager at Logan Capital
Management.
"Google's capex plans were one of those data points that
really freaked people out, and the fact that cash flow has gone
negative is something investors are circling."
Shares of Google's parent fell 7.3% after the results did
little to reassure investors as attention shifted to its higher
spending plans and its first ever cash burn.
The stock's fall dragged the communication services
sector 5.6% lower, leading sector-wise losses on the
benchmark S&P 500.
Tesla dropped 12.2% after reporting negative free cash flow
for the second quarter for the first time in more than two
years.
Other megacap stocks also weakened. Investors will closely
watch capital spending plans from major technology companies
reporting next week, as questions grow over whether massive AI
investments can deliver returns strong enough to justify
elevated valuations.
Geopolitical concerns added to the pressure. After months of
investor focus on the Strait of Hormuz, attention has shifted to
the Red Sea, where Iranian-aligned Houthis, who control areas
near the Bab el-Mandeb strait, have opened a new front in the
Middle East crisis.
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.
Brent crude futures rose past $100 a barrel, their highest
level since late May.
Wall Street's fear gauge, the CBOE Volatility Index,
rose 3.21 points to 19.83, its highest in nearly a month.
The surge in oil prices revived inflation worries, pushing
interest-rate-sensitive 2-year Treasury yields to a 17-month
high as traders increased bets on a Federal Reserve rate hike as
early as next week.
Markets are now pricing in about a 36% chance of a
25-basis-point increase at the Fed's July meeting, up from 12% a
week ago, according to CME's FedWatch tool.
The number of Americans seeking unemployment benefits for
the first time fell sharply last week, leaving Fed officials to
keep their focus on containing inflation.
At 11:55 a.m. ET, the Dow Jones Industrial Average
fell 534.25 points, or 1.02%, to 51,684.33, the S&P 500
lost 101.77 points, or 1.36%, to 7,397.19 and the Nasdaq
Composite lost 620.61 points, or 2.42%, to 25,070.29.
Chip stocks, which have recently hit a volatile patch, were
also lower mostly. Texas Instruments ( TXN ) fell 3.1% despite
forecasting quarterly revenue above estimates.
Defense giant Lockheed Martin ( LMT ) rose 10.3% after
lifting 2026 sales and profit forecasts.
Thermo Fisher Scientific ( TMO ) jumped 9.8%, as the medical
equipment maker raised its annual profit forecast after beating
estimates for second-quarter results.
Declining issues outnumbered advancers by a 3.18-to-1 ratio
on the NYSE and by a 3.16-to-1 ratio on the Nasdaq.
The S&P 500 posted 17 new 52-week highs and 12 new lows,
while the Nasdaq Composite recorded 35 new highs and 118 new
lows.