Wall Street indexes closed significantly lower on July 23rd, with the Nasdaq Composite sinking over 2% and the S&P 500 falling more than 1%. This broad-based decline was primarily driven by investor apprehension regarding the heavy capital expenditure plans of major tech companies for AI development and a substantial rise in oil prices, fueling inflation worries.
Brent crude futures climbed 7% to settle above $100 per barrel for the first time since May, while US West Texas Intermediate (WTI) crude advanced 6% to settle over $92 per barrel. This surge in oil prices, attributed to escalating US-Iran conflict and hostilities in the Middle East causing disruptions to shipments, reignited concerns about inflation just days before the Federal Reserve's policy meeting. Manulife John Hancock Investments' co-chief investment strategist, Matt Miskin, highlighted that rising oil prices pose a significant macro and market risk, especially with low unemployment data pressuring the Fed to prioritize inflation control.
Alphabet Inc., Google's parent company, saw its shares sink 7% and was the second-biggest drag on the S&P 500. This came after the company reported higher capital spending forecasts for 2026, increasing its projected expenditures to between $19 billion and $205 billion, up from previous estimates. Tesla Inc. also tumbled 14.5% after reporting negative free cash flow for the first time in over two years, exacerbating investor fears about AI-related spending and valuations. These performances rattled investors, leading to a 5.2% drop in the communication services index and a 5.12% decline in consumer discretionary.
Despite the overall market downturn, some sectors showed resilience. The industrials sector was the biggest gainer, up 1.77%, boosted by shares of Lockheed Martin, which rallied 10.5% after raising its 2026 sales and profit forecasts. RTX also saw a 7.3% increase in its shares after lifting its 2026 sales and profit forecasts, driven by demand for commercial aircraft maintenance and military systems. The CBOE Volatility Index, Wall Street's fear gauge, finished up 2.06 points at 18.7, indicating increased market unease. Treasury yields also rose, with the benchmark 10-year Treasury yield climbing above 4.7%, its highest level since 2024.
