Stocks Skid on Mega-Cap Spending, Oil's Surge
Published as of: July 23, 2026, 9:22 a.m. ET
(Thursday market open) Middle East escalation that sent crude prices and Treasury yields soaring appeared to overshadow results from Alphabet (GOOGL) and Tesla (TSLA) early. Attacks on Saudi tankers overnight in the Red Sea expanded the war's scope and posed a new threat to oil, which surged above $90 per barrel in a spiral that's been unrelenting all week. At the same time, concerns that mega-cap "hyperscalers" are overspending on AI dragged tech stocks.
Earnings were mostly positive for Alphabet and somewhat disappointing for Tesla. Alphabet raised spending forecasts and Tesla confirmed that 2026 remains a "massive" spending year, giving chip firms a lift. It wasn't enough to overcome geopolitical headwinds, and worries intensified in the bond market where the benchmark 10-year note yield posted a new 2026 high of 4.71%. In the background, chances of a Federal Reserve rate hike next week keep climbing as oil raises inflation concerns, reaching 38% according to the CME FedWatch Tool.
Major indexes finished flat to lower Wednesday in a waiting game ahead of earnings. Checking the playing field, margin debt remains elevated, though from a sentiment standpoint the current level of bullishness doesn't look extreme. It recently stood at 45%, versus 33% bearish, according to the AAII Investment Survey. Breadth remains relatively healthy, with 62% of S&P 500 shares trading above their 50-day moving averages.
Three things to watch
- Alphabet and Tesla earnings deeper dive: Alphabet's quarter looked solid, but it plans spending increases, raising its forecast for 2026 capital expenditures by $15 billion to about $200 billion and saying next year could be even higher. This unnerved investors who want to see signs that the spending is paying off. Beyond that, Alphabet's results might have implications for cloud market competition. Its 82% annual cloud gain outpaced cloud's impressive 63% first quarter growth and may be bullish for competitors Microsoft (MSFT) and Amazon (AMZN) when they report next week, assuming Alphabet didn't take share. "Alphabet's cloud growth of 82% was stellar," said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research (SCFR). Tesla's gross margins at 16.7% were well below the 19.4% estimate, and operating income disappointed, too. Active full self-driving subscriptions were a bright spot, surging 56% annually. Pulling back, today's moves extended a challenging stretch for the Magnificent Seven. They're up a combined 0.17% in six months.
- Earnings roll on as Intel looms: Intel (INTC) reports after the close, keeping focus on the chipmakers benefiting from the AI build-out. Last time out, Intel topped analysts' estimates and said it expected second quarter revenue between $13.8 billion and $14.8 billion on adjusted earnings per share of $0.20. Its guidance then was well above consensus, helped by frenzied demand for central processing units. Revenue in that division rose 22% in the first quarter and will likely be closely watched today for a momentum check. The chip sector has taken some punches lately amid AI spending worries, but Alphabet's spending forecast yesterday counteracted that. Last week, both Taiwan Semiconductor Manufacturing (TSM) and ASML (ASML) reported solid earnings and guidance, suggesting chip demand remains robust. Investors will likely carefully check Intel's guidance and listen for tone on the call. Three more mega caps report next week. As "hyperscalers" report, investors look for return on investment from AI that shows spending is paying off with revenue growth, user adoption, or other measurable returns.
- Turbulence still heavy despite surface calm: Volatility had remained in check, with the Cboe Volatility Index (VIX) staying below 19 despite the war's impact. It rose 14% this morning after the latest Middle East skirmishes. Any move toward 20 would likely draw attention, as that's traditionally a level reached when uncertainty ramps up. Futures trading shows VIX topping 20 by October and in contango, meaning future contracts have higher values than spot. Though VIX stayed in its lane, it's not so smooth underneath. "A rotational market is ongoing, with historically high dispersion and historically low correlations," said Liz Ann Sonders, chief investment strategist at SCFR. As of mid-week, only the energy sector had more than 50% of its stocks trading at four-week highs. Other sectors range between 1% and 13%. No sector had more than 20% of its stocks trading at 52-week highs. This provides evidence of churn as investors seem uncertain where to focus. Earnings season, the Fed meeting, and next month's July jobs report all loom, perhaps contributing to the sense of dysregulation. That's why it's hard to pinpoint sector direction, with today's winner often becoming tomorrow's goat.
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On the move
- Alphabet initially fell almost 5% early. Analysts appeared enthused by the firm's results, with Wedbush adding Alphabet to its "Best Ideas" list and Barclays and Wells Fargo raising their price targets. Morgan Stanley lowered its price target but kept its overweight rating on shares. Alphabet said its spending is necessary to meet accelerating AI demand it's seeing.
- Tesla plunged 7% early amid disappointment about an earnings per share miss and worries about a 142% annual surge in capital spending. Morgan Stanley lowered its price target on the firm but kept its equal-weight rating on shares, saying accelerating capital spending is "a necessary investment" to secure leadership in autonomy and robotics.
- ServiceNow (NOW) rebounded 5% early today from yesterday's software sector losses after it beat consensus and raised subscription guidance.
- Chip and AI infrastructure stocks were a bright spot early today thanks to hopes for continued spending on AI that lifted the South Korean market earlier today. SK Hynix (SKHY) climbed 4% and got a boost from news it has limited conversion of its South Korea-listed shares into U.S.-traded American depositary receipts to 2.5% of total shares outstanding, according to Briefing.com.
- IBM (IBM) dropped 2% after reporting earnings late Wednesday. IBM pre-announced results last week and disappointed. Earnings of $2.93 a share were worse than consensus, and the company reduced its fiscal year revenue growth guidance to 4.5%.
- Texas Instruments (TXN) fell 4% despite a solid earnings beat and better-than-expected guidance.
- Lockheed Martin (LMT) climbed 5% ahead of the open after raising its 2026 outlook and beating analysts' earnings expectations.
- Rollins (ROL) toppled 17% ahead of the open after the pest control firm missed analysts' estimates in its latest quarter. Sales fell short due to slower growth in the residential business. Two Wall Street firms downgraded the stock.
- Cleveland-Cliffs (CLF) soared 13% despite quarterly revenue slightly missing the FactSet consensus. Earnings beat estimates and the company kept its steel shipment volume forecast for the fiscal year unchanged.
- Restaurants including Chipotle (CMG), Sweetgreen (SG), and Wendy's (WEN) lost ground Wednesday as concerns about food safety appeared to hurt the industry.
- Technically, the S&P 500 Index and Russell 2000® (RUT) are above their 50-day moving averages but the Nasdaq, Nasdaq-100® (NDX) and PHLX Semiconductor Index (SOX) "are all in a separate, more bearish, bucket," Peterson said. There's been technical deterioration for chips, and caution could last until tech-centric indices rise above their 50-day lines.
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Bitcoin futures (/BTC—candlesticks) have rebounded from recent lows, gaining about 7% over the past month, but a falling 50-day simple moving average (red line) sits just overhead, posing a potential technical challenge to the rally in the short term.
The week ahead
Check out the investors' calendar for a summary of the top economic events and earnings reports on tap this week.
July 24: June new home sales and expected earnings from American Express (AXP), NextEra Energy (NEE), Verizon Communications (VZ), and HCA Healthcare (HCA).
July 27: June durable orders, and expected earnings from Nucor (NUE).
July 28: June consumer confidence and expected earnings from Coca-Cola (KO), Boeing (BA), Corning (GLW), United Parcel Service (UPS), Sherwin-Williams (SHW), Illinois Tool Works (ITW), Royal Caribbean Cruises (RCL), Visa (V), Seagate (STX), Waste Management (WM), Mondelez (MDLZ), Ford (F), and Teradyne (TER).
July 29: Expected earnings from Procter & Gamble (PG), Vertiv (VRT), General Dynamics (GD), Aon (AON), Microsoft (MSFT), Meta Platforms (META), Lam Research (LRCX), Arm Holdings (ARM), Qualcomm (QCOM), and Starbucks (SBUX).
July 30: Q2 GDP first estimate, June PCE prices, June core PCE prices, June personal spending and personal income, and expected earnings from Mastercard (MA), Shell (SHEL), Anheuser-Busch InBev (BUD), Bristol-Myers Squibb (BMY), Altria (MO), Southern (SO), Sanofi (SNY), Apple (AAPL), Amazon (AMZN), and Stryker (SYK).
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