Dow falls 500 points as oil surge, AI spending fears hit Wall Street

• Brent crude climbed 7% to $100.69 per barrel after Houthi attacks on Saudi tankers and Trump's threats of military action against Iran, reigniting inflation concerns.
• Alphabet raised its 2026 capex guidance to $195-205 billion (from $180-190 billion), while both Alphabet and Tesla reported negative free cash flow and rising operating expenses, pressuring tech valuations.
• The 10-year Treasury yield rose above 4.7% (highest since January 2025), and Fed funds futures now price an 82% probability of a September rate hike, up significantly from a week earlier.

Market Summary: Dow Falls 500 Points on Oil Surge and AI Spending Concerns

Key Market Movements:

U.S. equities declined sharply on Thursday, with the Dow Jones falling 507 points (-1%), the S&P 500 dropping 1.2%, and the Nasdaq Composite leading losses with a 2.2% decline. Technology stocks bore the brunt of the selloff.

Oil Price Surge:

Brent crude jumped 7% to $100.69 per barrel—the first close above $100 since May—while WTI rose 6% to $92.19. The spike followed Houthi attacks on Saudi Arabian oil tankers in the Red Sea and escalating Middle East tensions, with President Trump threatening further military action against Iran. Rising energy costs reignited inflation concerns, complicating the Federal Reserve's policy outlook.

AI Spending Fears:

Alphabet and Tesla disappointed investors with earnings results. Alphabet raised its 2026 capital expenditure guidance to $195-205 billion (up from $180-190 billion), highlighting mounting AI infrastructure costs. Both companies reported negative free cash flow in Q2, raising concerns about capital-intensive growth strategies. Tesla posted an earnings miss with operating expenses growing faster than revenue. Weakness spread across tech, pulling down Meta, Microsoft, and Amazon.

Treasury Yields and Fed Outlook:

The 10-year Treasury yield climbed above 4.7% (highest since January 2025), while the 2-year rose above 4.36%. Fed funds futures showed 82% probability of a September rate hike, up significantly from the prior week. The CBOE Volatility Index hit its highest level in nearly a month.

Bright Spots:

Industrial stocks outperformed, with Lockheed Martin and Thermo Fisher Scientific raising guidance. The Philadelphia Semiconductor Index declined as investors awaited Intel earnings.