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July 23, 2026 - 00:12
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(Bloomberg) — US equity-index futures declined in early Thursday trading as investors weighed earnings from AI heavyweights for evidence that surging capital spending is translating into growth. Oil extended its rally.Contracts for the S&P 500 fell 0.2% while those for the Nasdaq 100 slipped 0.4% after both benchmarks fell in New York. In late trading, Alphabet Inc. dropped almost 5% after lifting its full-year capital expenditure forecast even as cloud revenue beat estimates. Tesla Inc. missed earnings expectations, while International Business Machines Corp. lowered its full-year sales outlook. Stock futures in Asia pointed to a mixed open.US crude oil climbed over 1% on Thursday as the US and Iran continued to play down the prospect of peace talks and concerns over supply disruptions intensified. Gains in oil on Wednesday sent Treasuries lower, with the two-year yield rising four basis points.Alphabet’s results mark the start of a critical stretch for the AI trade. After last week’s selloff in technology stocks, earnings over the next two weeks will be closely watched for evidence that hundreds of billions of dollars invested in AI are translating into returns.“We remain constructive on AI’s growth story, but we favor a more balanced exposure across the AI value chain — from semiconductors and hardware to megacap tech and more defensive areas of the industry,” said Ulrike Hoffmann-Burchardi at UBS Chief Investment Office. “Investors should also ensure diversification beyond AI.”Alphabet now expects capital spending to reach as much as $205 billion this year, eclipsing its previous guidance and far exceeding Wall Street expectations.The company is accelerating investment in AI computing capacity to meet surging demand, executives said in a call with analysts, in a move that is likely to intensify scrutiny of spending already projected to hit record levels next year.“AI optimism remains intact, but the burden of proof has shifted decisively onto management teams,” wrote Mark Malek, chief investment officer at Siebert Financial. “Future earnings calls will increasingly focus on return on invested capital rather than AI ambitions.”As the first US megacap technology company to report earnings this season, Alphabet is setting the tone for a sector that has collectively committed hundreds of billions of dollars to AI infrastructure. Investors will be watching upcoming results from Microsoft Corp., Meta Platforms Inc. and Amazon.com Inc. for further evidence those investments are beginning to generate returns.In Asia, the yen will remain in focus after recovering some ground from its slide beyond 163 per dollar earlier this week, the weakest level since 1986.While the Bank of Japan is widely expected to move rates roughly once every six months, it’s open to moving earlier than that timeframe if needed, people familiar with the matter said, pointing to signs that inflation is becoming entrenched.“Japanese policymakers are facing an uphill battle to support the yen while the price of oil jumps back up towards $100 per barrel,” said MUFG Bank strategist Lee Hardman.Geopolitical tensions also remained in focus. President Donald Trump said the Islamic Republic is “getting hit so hard” following the deaths of four US troops in the past week, but wasn’t yet ready to sign a deal. He earlier vowed to hit Iranian bridges and power plants if Tehran continued attacking vessels in the Strait of Hormuz.Iran responded with its own warning, with the semi-official Tasnim news agency reporting that Tehran would target regional infrastructure, including energy facilities tied to US interests, if Washington attacked bridges or power plants.The renewed escalation has fueled concerns that higher energy prices could keep inflation elevated and complicate the Federal Reserve’s policy outlook. With the central bank meeting next week, money markets are pricing about a 30% chance of a rate increase and a 70% probability that policymakers hold steady.“Diplomatic efforts to end the conflict in the Middle East have effectively stalled as military strikes continue with no sign of easing,” said Ian Lyngen at BMO Capital Markets. “The rally in energy continues to weigh on the Treasury market as hostilities between the US and Iran intensify.”Corporate Highlights:Texas Instruments Inc., the biggest maker of analog and embedded processing chips, gave a sales forecast that topped estimates but failed to excite investors, who have bid up the company’s shares this year. ServiceNow Inc. reported better-than-expected quarterly sales and bookings, boosting Wall Street’s hopes that the software maker’s new AI tools will spur growth. Southwest Airlines Co. provided an outlook for the full year that exceeded projections, even as operating revenue for the second quarter missed analysts’ estimates. Some of the main moves in markets:StocksS&P 500 futures fell 0.2% as of 7:05 a.m. Tokyo time Hang Seng futures rose 0.3% S&P/ASX 200 futures rose 0.8% CurrenciesThe Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1408 The Japanese yen was little changed at 163.09 per dollar The offshore yuan was little changed at 6.7742 per dollar The Australian dollar fell 0.1% to $0.6990 CryptocurrenciesBitcoin rose 0.1% to $65,969.76 Ether rose 0.5% to $1,936.21 CommoditiesWest Texas Intermediate crude rose 1.1% to $87.80 a barrel Spot gold fell 0.2% to $4,121.48 an ounce This story was produced with the assistance of Bloomberg Automation.©2026 Bloomberg L.P.
