Major North American stock 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 worldwide.
The S&P 500 fell more than 1% as 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 came under additional pressure as Brent crude oil futures rose above US$100 a barrel for the first time since May. U.S. oil futures settled above US$92.
Intensifying 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 U.S. bases in nearby countries. 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 U.S. 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 armor and the stocks are being sold off.”
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 and the Nasdaq Composite lost 553.21 points, or 2.15%, to 25,137.69.
In Toronto, technology shares were also among the leading decliners. The S&P/TSX Composite Index ended down 292.45 points, or 0.8%, at 35,192.66, pulling back from a record closing high on Wednesday. The technology sector fell 2.7%, with shares of e-commerce company Shopify down 5.4%.
Consumer discretionary was down 2.7%, heavily weighted financials lost 1.1% and the materials group, which includes metal mining shares, ended 1.4% lower. The price of gold fell 2%.
The TSX energy sector was up 2.2% after U.S. crude settled up 6.2%.
Among Canadian stocks, FirstService Corp shares dropped 7.5% after the company missed quarterly revenue estimates, contributing to a 2.5% decline in real estate.
Teck Resources beat Wall Street estimates for second-quarter profit, helped by higher copper prices and increased production. Its shares ended up 4.4%.
Domestic data was upbeat - retail sales rose 1% in May, while a preliminary estimate for June showed sales up 0.4%.
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 defense stocks including Lockheed Martin and RTX. Shares in Lockheed rallied 10.5% after it lifted 2026 sales and profit forecasts. RTX was the S&P 500’s second biggest boost as it finished up 7.3% after it raised its 2026 sales and profit forecasts on demand for commercial aircraft maintenance and military systems.
Shares of Google’s parent, Alphabet, sank 7%, making it the second-biggest drag on the benchmark index after it reported higher spending plans while it also burned cash. The stock’s fall also dragged down the communication services index 5.20%, making it the weakest of the 11 sectors.
Consumer discretionary was the second-biggest loser, ending down 5.12%. Its biggest drag was from Tesla, whose shares tumbled 14.5%, 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 finished up 2.06 points at 18.7, after earlier hitting 20.3, which was its highest level in almost a month.
The volatile Philadelphia semiconductor index ended down 0.5% as investors anticipated results from chip giant Intel. Its shares soared 11% in the post market after it reported the fastest revenue growth in almost 15 years.
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.
Canadian bond yields rose across the curve, with the five-year yield gaining 6 basis points to its highest since May. The rise in borrowing costs were even more notable across the pond, as reignited inflation worries prompted some hawkish signals from the European Central Bank, although the bank held rates steady at 2.25%. It had lifted them in June. Germany’s 10-year Bund yield, the benchmark for euro zone borrowing costs, rose above 3.2% for the first time since 2011, back when oil was also on a tear and the bloc’s debt crisis was about to break out again.
Shares in analog chip company Texas Instruments finished down 3% despite forecasting quarterly revenue above estimates. However, shares in Thermo Fisher Scientific rallied 8.7% after the medical equipment maker raised its annual profit forecast and beat estimates for second-quarter results.
Declining issues outnumbered advancers by a 2.99-to-1 ratio on the NYSE, where there were 82 new highs and 354 new lows. On the Nasdaq, 1,374 stocks rose and 3,467 fell as declining issues outnumbered advancers by a 2.52-to-1 ratio. The S&P 500 posted 17 new 52-week highs and 15 new lows while the Nasdaq Composite recorded 41 new highs and 184 new lows. On U.S. exchanges, 16.21 billion shares changed hands compared with the 18.51 billion average for the last 20 sessions.
- Reuters, Globe staff