Wall Street Highlights: S&P 500, Nasdaq Suffers Worst Day In A Month As Oil Soars Over $100

Oil prices pushed over $100 a barrel and bond yields rose as President Donald Trump threatened to escalate the conflict in the Middle East following attacks by Iran-backed Houthis on two Saudi Arabian oil tankers in the Red Sea.

The benchmark equities gauge dropped 1.21%, its worst day since June 23 after falling further below its 50-day moving average. The Nasdaq 100 Index tumbled 1.87%, its worst day since July 13 after paring what had been a drop of as much as 2.5% following steep losses in Alphabet Inc. and Tesla Inc. A basket of the so-called Magnificent Seven companies fell 4.78% - its biggest one-day drop since the tariff tantrum in April 2025 to wipe out $797 billion in market value.

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In after-hours trading, Intel Corp. delivered a surprisingly strong revenue forecast for the current period. Shares soared 12% post market, after falling 2.33% earlier.

Among other individual shares in regular trading, Nvidia Corp. fell 1.56%, trimming earlier losses after falling as much as 2.9%. Meta Platforms Inc. and Apple Inc. declined 3.36% and 1.30%, respectively. Tesla slumped 14.52%, making it the biggest S&P 500 decliner on Thursday, after its profit tumbled despite a strong quarter for its automotive business.

Alphabet slid 7.13% - the S&P's second-largest point decliner behind Tesla - after the Google parent gave an outlook for capital expenditures that was higher than expected, fanning fears about the sustainability of AI spending that's elevated chipmakers and the pace of economic growth. 

Equities sank under the pressure of rising oil prices, which is threatening to reaccelerate inflation and is boosting bets the Federal Reserve could raise interest rates as soon as next week. Energy shares advanced 0.558%. The intensifying war with Iran pushed Brent crude over $100 a barrel after the Iran-backed Houthis claimed their first attack on commercial ships in recent months.

American Airlines Group Inc. shares fell 8.35% - its worst day in a year - after it said it may report a loss this year amid persistently high fuel prices.

Government bond yields has marched higher, reflecting fears that inflation could heat up again and, in turn, raising borrowing costs across the financial system.

"Higher yields are spooking markets," Thomas Martin, senior portfolio manager at Globalt Investments LLC, said by phone. "The AI trade holds a huge impact for the trajectory of corporate earnings and economic growth, and financing is becoming risky for Big Tech and chipmakers if borrowing costs rise."

Technology companies are particularly susceptible to fears of rising interest rates because many of them are valued on projected profits delivered years in the future. The present value of those future profits are worth less as yields rise. Higher rates also make financing operations - like massive AI buildouts - more expensive.

"Risks remain skewed towards tightening," wrote Seema Shah, chief global strategist at Principal Asset Management. "A combination of sustained economic strength, a renewed rise in core inflation, and signs that inflation expectations are becoming less well anchored would materially raise the probability of rate hikes."

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An equal-weighted version of the S&P 500 - a proxy of market breadth - slipped 0.0327%, with more than 300 stocks declining in the benchmark while about 200 rose.

Shares of companies that provide AI infrastructure equipment, however, rose after Alphabet said in its earnings call that the company plans to expand use of third-party capacity in the third quarter. For instance, Micron Technology Inc. rose 3.20% while US-listed shares of SK Hynix Inc. climbed 2.56%.

Lockheed Martin Corp. jumped 10.54% - the best S&P 500 perfromer Thursday - after the company raised its full year sales forecast.

Elsewhere, Albertsons tumbled 21.64% after cutting its adjusted earnings per share guidance for the full year. Meantime, Rollins Inc. shares sank 9.27% - among the biggest S&P 500 decliners on Thursday - after the pest control company reported results that fell short of expectations. And T-Mobile US Inc. dropped 10.75%, its largest drop since April 2025, after the telecom company reported second-quarter revenue that missed expectations.

On the economic front, initial applications for US unemployment benefits fell last week to the lowest since 1969, signaling layoffs remain muted in a stable labor market. On Friday, traders will sort through new home sales data.