Stock Market Update: S&P 500 Hits Fourth Straight Record Fueled by AI Optimism
The S&P 500 notched its fourth consecutive record close, driven by strong Alphabet earnings that highlight artificial intelligence as a key growth driver. The Nasdaq Composite also closed at a fresh high with a 0.2% gain, while the Dow Jones Industrial Average slipped 0.6%, weighed down by a post-earnings drop in IBM shares.
Alphabet's AI Focus Boosts Tech Stocks
Alphabet surpassed second-quarter earnings expectations and reaffirmed its commitment to AI investments. Shares of the Google parent rose alongside other AI-related stocks like Nvidia, supporting gains in tech-heavy indices. Wall Street remains optimistic about AI's contribution to sustained revenue growth, especially as Search revenues hold steady amid AI disruption concerns.
However, Tesla's stock fell over 6% after missing earnings and revenue targets. CEO Elon Musk warned of "a few rough quarters," citing challenges including a drop in European sales and the elimination of EV tax credits following recent budget changes.
Trade Developments Support Market Sentiment
Trade optimism helped lift markets midweek, with the US-Japan trade pact providing some upside momentum. Reports indicate the US and EU are nearing a deal to impose a 15% tariff on most European imports, replacing the previously threatened 30%. This new rate could become the baseline for reciprocal tariffs effective August 1, up from the earlier 10% set in April.
Mixed Market Close Amid Earnings and Economic Data
- S&P 500 eked out a 0.1% gain to secure its fourth straight record close.
- Nasdaq Composite gained 0.2%, hitting a new high.
- Dow Jones Industrial Average declined 0.6%, pressured by IBM's earnings miss.
IBM’s core software sales fell short of expectations, causing a 6% drop in its stock ahead of the opening bell. The company also withheld guidance for the third quarter, raising concerns among investors.
Federal Reserve Faces New Legal and Political Challenges
Ahead of President Trump's visit to the Federal Reserve headquarters, officials showcased a $2.5 billion renovation amid ongoing political pressure. The president has publicly criticized Fed Chair Jerome Powell and pushed for interest rate cuts.
Adding to the Fed’s challenges, a lawsuit filed by Azoria Capital demands the Fed's Federal Open Market Committee (FOMC) open its monetary policy meetings to the public. The suit alleges violation of a 1976 federal law by keeping deliberations behind closed doors.
Airline Sector Faces Headwinds
- Southwest Airlines (LUV) saw shares tumble over 11% after lowering its full-year pre-tax profit forecast due to weak summer travel demand and tariff uncertainty.
- American Airlines (AAL) shares dropped 6%, citing a tough July for domestic bookings and a 6% year-over-year revenue decline for the quarter.
Other Market Movers
- Apple’s iOS 26 introduces a major interface overhaul with a "Liquid Glass" design, available now as a public beta. The update represents the most significant iPhone software change in years.
- UnitedHealth (UNH) stock declined following news of a Department of Justice investigation into its Medicare billing practices.
- Intel (INTC) is set to release Q2 earnings amid efforts by new CEO Lip-Bu Tan to turn around the company after a challenging year.
Market Outlook and Key Themes
Investor focus remains on AI as a growth driver for Big Tech, with Alphabet’s solid performance reinforcing confidence. Trade developments continue to play a critical role in shaping market sentiment, while challenges in the airline sector and ongoing legal scrutiny of the Fed add complexity.
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