Alphabet Leads Thursday’s Sharpest Stock Moves as Software Sinks
Thursday’s sharpest stock moves told a story of rotation. Alphabet’s record plunge dragged the Nasdaq lower, while smaller stocks rose and nine of the S&P 500’s 11 sectors advanced.
The Dow Jones Industrial Average slipped 0.25 percent to 52,342.56. The S&P 500 fell 0.30 percent to 7,720.39. The Nasdaq Composite dropped 1.38 percent to 26,184.72. The Russell 2000, which tracks smaller companies, rose 1.01 percent to 2,859.22.
Alphabet’s record fall
Alphabet, Google’s parent company, closed at 283.82 dollars, down 12.64 percent from Wednesday’s close of 324.89 dollars. It was the stock’s largest one-day percentage decline on record, worse than its 11.6 percent fall in March 2020, and it erased more than 500 billion dollars in market value. Shares touched an intraday low of 280.36 dollars.
The trigger was the company’s third-quarter report, released after Wednesday’s close. Revenue rose 25 percent to 127.58 billion dollars but came in just below Wall Street’s expectations of about 128.2 billion dollars. Google Cloud revenue more than doubled to 30.71 billion dollars, yet Search revenue grew 12 percent to 63.35 billion dollars, a slowdown from 17 percent growth in the second quarter, and total advertising revenue of 82.0 billion dollars fell short. Capital spending of 51.4 billion dollars pushed free cash flow to a negative 9.07 billion dollars, and net income fell 25 percent to 26.17 billion dollars, including an 8.7 billion dollar loss on equity securities.
The deeper question behind the selloff is whether the enormous spending on artificial intelligence infrastructure is converting into cash fast enough. Alphabet reaffirmed capital spending of 195 billion to 205 billion dollars for 2026 and said spending would increase significantly next year. Investors rewarded cloud growth but punished the combination of slowing advertising, heavy capital spending and negative free cash flow.
The rest of the megacap group split. Meta rose 1.96 percent to 624.52 dollars and Apple rose 1.48 percent to 348.91 dollars. Microsoft edged 0.16 percent lower to 530.14 dollars despite its strong Azure results, after reports during the session that it plans to raise at least 25 billion dollars through a bond sale. Amazon fell 4.25 percent to 243.79 dollars ahead of its own report, Nvidia slipped 0.83 percent to 213.60 dollars, and Tesla eased 0.23 percent to 403.30 dollars.
Software’s AI problem
Software stocks suffered the day’s steepest falls after earnings disappointments collided with a growing fear that artificial intelligence tools could automate away the work software companies sell.
ServiceNow closed at 109.67 dollars, down 26.95 percent, after missing profit estimates. Fortinet closed at 139.10 dollars, down 20.09 percent, as investors focused on slowing product revenue growth despite a profit beat. Atlassian fell more than 7 percent, and Salesforce, Datadog and Workday each fell more than 4 percent.
Semiconductor stocks were not spared either. Marvell closed at 218.34 dollars, down 13.24 percent, after Bloomberg reported the chip company is near a deal to buy optical equipment maker Lumentum, whose shares rose 0.6 percent. Micron Technology fell about 5 percent, and the iShares Semiconductor ETF fell 1.6 percent. The pattern suggests the market punished earnings and guidance misses selectively rather than turning against artificial intelligence exposure itself.
The other side: Lilly and DoorDash
Not every earnings report was punished. Eli Lilly gained 6.63 percent after raising its full-year revenue outlook, helped by demand for its obesity and diabetes treatments. DoorDash rallied more than 6 percent after an earnings beat and news that it will seek to buy Instacart parent Maplebear for 17 billion dollars. Maplebear shares closed 2.2 percent lower.
Caterpillar showed how much guidance mattered. The construction equipment maker closed at 647.39 dollars, down 9.25 percent, despite a slight beat in earnings and sales, as its fourth-quarter sales guidance disappointed. The stock weighed on the Dow.
What the rotation says
Beneath the headline declines, the market broadened rather than broke. Advancers outnumbered decliners on both the New York Stock Exchange and the Nasdaq. Health care gained 2.40 percent, while technology fell 1.18 percent and communication services fell 1.87 percent. Money moved out of crowded artificial intelligence winners and into smaller companies and defensive sectors, a rotation that softened the damage to the average stock even as the Nasdaq fell.
The economic backdrop was mixed. September inflation came in slightly cooler than economists expected, with core personal consumption expenditures prices up 3.1 percent from a year earlier, while third-quarter economic growth beat forecasts at a 3.4 percent annual rate. The Federal Reserve held its benchmark rate at 3.75 percent to 4.00 percent on Wednesday, and traders priced about an 80 percent chance of a rate increase in December, according to CME FedWatch. That pricing reflects market bets, not guidance from the central bank. The 10-year Treasury yield eased to about 4.94 percent, and the volatility index ended near 17.
The session’s story continued after the closing bell. Amazon reported earnings per share of 1.89 dollars, below the 1.97 dollars expected, and net sales of 201.9 billion dollars, just short of forecasts, even as operating income of 28.1 billion dollars beat estimates and cloud revenue jumped 39 percent to 46.0 billion dollars. Its fourth-quarter guidance midpoints also sat below consensus, and shares fell about 6 percent in after-hours trading. Intel reported revenue of 16.51 billion dollars, up 21 percent, and adjusted earnings per share of 52 cents, beating the 41 cents expected, but its fourth-quarter guidance of 15 billion to 16 billion dollars in revenue and 25 cents in adjusted earnings fell far short of expectations, and shares fell about 17 percent after hours. Both reports will carry into Friday’s regular session.
This article reports market movements and is not investment advice.
