Wall Street closed lower on Thursday, with the Nasdaq Composite taking the brunt of the damage after Alphabet’s earnings revived worries about how much money Big Tech is pouring into artificial intelligence. The Dow Jones Industrial Average and S&P 500 slipped far less, cushioned by gains in health care and small-cap stocks. Fresh data showed the economy running hot, which kept interest rate worries in the background a day after the Federal Reserve held rates steady with two officials dissenting in favor of a hike.
What Moved Markets
The Dow Jones Industrial Average closed at 52,342.56, down 132.54 points, or 0.25%. The S&P 500 finished at 7,720.39, down 23.59 points, or 0.30%. The Nasdaq Composite fell 365.13 points, or 1.38%, to 26,184.72. The small-cap Russell 2000 bucked the trend, rising 1.01% to 2,859.22.
The selling centered on Alphabet, the parent of Google. Investors were unhappy that its quarterly spending on data centers and equipment outran the cash its businesses generated, leaving free cash flow negative for a second straight quarter, and that growth in Google Search slowed. That put a spotlight on the question of when massive AI investments will pay off. Microsoft, which reported strong cash flow and cloud growth the same day, held up much better and ended down just 0.16%.
Economic data was solid. The economy grew at a 3.4% annual rate in the third quarter, ahead of the 3.2% economists expected, and weekly jobless claims dipped to 194,000. The Fed’s preferred inflation gauge, core PCE, rose 0.3% in September, while overall PCE prices were up 3.6% from a year earlier. Strong growth alongside sticky inflation can make rate cuts less likely, which tends to pressure richly valued tech shares most.
Notable Movers
Alphabet (GOOGL) was the day’s biggest drag, sinking 12.64% to $283.82 after its results.
Caterpillar (CAT) fell roughly 9% in late trading even though it beat profit and sales forecasts, because it warned that tariff costs will squeeze its profit margin.
Marvell Technology (MRVL) traded sharply lower on media reports that it is in advanced talks to buy Lumentum (LITE), though neither company had confirmed the talks.
On the upside, ADT (ADT) jumped more than 30% after agreeing to be acquired by Thrive Holdings for $10 per share in cash.
DoorDash (DASH) said it will acquire Instacart for $65 per share, mostly in cash. Crocs (CROX) and Teladoc Health (TDOC) each climbed more than 20% after better-than-expected quarterly results and raised outlooks, and Eli Lilly (LLY) rose sharply on strong sales of its weight-loss drugs, helping push the S&P 500 health care sector to a record high. Apple (AAPL) gained 1.48%.
Looking Ahead
After the closing bell, Amazon, Intel and Sandisk all reported quarterly results, and Amazon shares were weaker in after-hours trading, so tech may be in focus again at Friday’s open. Investors will also be watching whether Marvell or Lumentum confirms the reported deal talks. Oil is trading near $102 a barrel, and with the Fed split on its next move, upcoming inflation and jobs reports will be closely read for clues. As always, one day’s move does not make a trend, and earnings-driven swings can reverse quickly.