The New York stock market opened lower. It is seen as the fallout from concerns about big tech corporations' investment in artificial intelligence (AI) and a rise in oil prices.
As of 9:51 a.m. on the 23rd (local time), on the New York Stock Exchange, the Dow Jones Industrial Average fell 493.35 points (0.94%) from the previous session to 51,725.23. The Standard & Poor's (S&P) 500 fell 71.04 points (0.95%) to 7,427.92, and the Nasdaq composite dropped 438.45 points (1.71%) to 25,252.45.
It is attributed to investor sentiment freezing after the first big tech results of the quarter failed to meet market expectations. Alphabet and Tesla opened the earnings season. Both companies released their report cards after the close the previous day.
Alphabet posted a record quarterly growth rate in its cloud institutional sector, but attention focused more on capital expenditure (CAPEX) than on results. Alphabet's CAPEX outlook for this year was raised to $195 billion–$205 billion from the previous $180 billion–$190 billion. As a result, Alphabet shares plunged 6.40%. Still, second-quarter cloud revenue rose 82% from a year earlier to $24.8 billion, continuing solid growth.
Tesla received a harsher report card. The company said second-quarter free cash flow turned negative for the first time in about two years, sending the stock tumbling 12.29%. Still, revenue in the automotive institutional sector rose 23% to $20.52 billion, showing resilience.
On top of that, with the Red Sea facing a blockade risk following the Strait of Hormuz, international oil prices surged, weighing on stocks. Brent crude on this day topped $100 a barrel again for the first time since May. Right after the New York market opened, the 10-year U.S. Treasury yield rose 0.05 percentage point from the previous transaction day to 4.71%, and other maturities also climbed, adding weight to the Federal Reserve's rate hikes.
Meanwhile, the European Central Bank (ECB) held a monetary policy meeting in Frankfurt, Germany, and said it would keep the deposit rate at 2.25% per year and leave both the main refinancing rate and the marginal lending rate unchanged at 2.40% and 2.65%, respectively. The ECB said, "The energy price outlook is highly volatile, but for now it is showing a level close to the baseline scenario of the June Eurosystem staff projections."
It added, "Uncertainty remains elevated and the impact of the energy shock on inflation has not yet fully materialized," and explained the freeze by saying, "Therefore, the Governing Council is closely monitoring the strength and duration of these shocks, their indirect effects, and second-round spillovers."