U.S. stocks finished lower overnight as investors shifted into a more defensive stance, with trading shaped by higher oil prices, revived rate-hike expectations and a widening split in Big Tech earnings. By the close, the Dow Jones Industrial Average slipped 0.01%, the S&P 500 fell 0.14%, and the Nasdaq Composite lost 0.57%.
The headline index moves were modest. The mood shift was not. Markets are now focused on two risks at once: Middle East tensions lifting oil prices and threatening a fresh inflation impulse, and strong top-line growth from AI leaders that is being overshadowed by spending levels that are starting to strain cash flow.
Hormuz and the Red Sea return to the center of the oil trade
Oil gained after an exchange of threats between the U.S. and Iran. Trump said that if Iran opened fire on ships in the Strait of Hormuz, the U.S. would bomb Iranian bridges or power plants, including facilities near or inside Tehran. Iran responded that it would firmly defend sovereignty over the strait. The report said that if the U.S. follows through on its threat, Iran could cut off oil flows from the Gulf region and target oil, gas and power infrastructure.
The risk picture extends beyond the Persian Gulf. Yemen’s Houthis said they used ballistic missiles, cruise missiles and drones to attack two Saudi oil tankers, adding that about 10 ships were forced to turn back. That pushed the Red Sea shipping route back onto traders’ screens.
Brent crude moved above $96 a barrel intraday, while WTI climbed to about $88, with both benchmarks reaching six-week highs. According to the report, the move was not driven by geopolitics alone. It reflected a combination of risks tied to Hormuz, the Red Sea, Cushing inventories nearing operational limits and a decline in U.S. crude production.
DOE data showed Cushing inventories fell another 674,000 barrels last week and were close to operating minimums. U.S. crude production has also pulled back from record highs, while releases from the Strategic Petroleum Reserve have accelerated, reducing the supply cushion.
Standard Chartered analysts said Middle East risk has evolved into a “dual chokepoint problem,” and shipping costs for crude are likely to rise as long as those risks remain. For macro traders, the oil breakout is not just an energy story. It is also a signal that inflation expectations are being repriced. The market has again raised the possibility of gasoline returning to the $4-a-gallon threshold. If U.S. retail gasoline prices keep climbing, discretionary spending by lower-income consumers, along with restaurant, convenience-store and retail traffic, could come under pressure.
Long-end Treasury pressure revives “bond vigilante” talk
The U.S. dollar was broadly flat and failed to extend a one-way rally, but the inflation concern tied to higher oil prices clearly hit the Treasury market. The 2-year Treasury yield rose to its highest level since February 2025. The 30-year Treasury yield climbed to about 5.14% and has now held above 5% for 13 consecutive trading days, one of the most striking long-end pressure zones in nearly two decades.
Higher long-term rates raise mortgage costs, corporate borrowing costs and government funding costs. The market has again started talking about “bond vigilantes,” a phrase used when investors express dissatisfaction by selling Treasuries and demanding higher yields. Tony Rodriguez of Nuveen said excessive U.S. debt and fiscal deficits are a major reason long-term yields have struggled to fall. Haverford Trust also warned that if bond vigilantes truly return, both bonds and equities would face a test.
Institutional forecasts cited in the report show that uncertainty under new Federal Reserve Chair Warsh is becoming the new normal. With little forward guidance, the market is assigning about a 30% chance of a 25-basis-point rate hike at the July 29 meeting. Economists still broadly expect no change, but inflation pressure passing through from oil is pushing the September hike path close to fully priced.
Fiscal risk is also in the mix. Trump warned that the federal government could shut down on Sept. 30. The House has passed a short-term funding bill extending government financing through Dec. 4, but the measure still needs Senate approval. If Congress does not pass funding in time, most federal agencies will run out of money at midnight on Sept. 30.
Alphabet and Tesla beat on revenue, but negative free cash flow unsettles investors
Earnings season has brought the tension between capital expenditure and cash generation into sharper focus. Alphabet and Tesla both posted revenue above expectations, yet both turned free cash flow negative. After lifting or defending very large spending plans, their shares fell in after-hours trading, a sign that investors are becoming less willing to tolerate the AI industry’s cash burn.
The market split was clear overnight. Demand for AI infrastructure remains strong, but investors are applying a tougher standard to profitability and cash flow. Capital continued to rotate toward chips, networking, storage and power equipment. The Philadelphia Semiconductor Index rose 0.44%, Nvidia gained 2.30%, and Broadcom added 2.67%. Software was weaker, with the iShares Expanded Tech-Software ETF down 3.05% and Palantir falling 6.10%.
Spending plans across the AI ecosystem are still expanding. OpenAI raised its projected computing spend before 2030 to $750 billion and plans to invest $20 billion in the Camellia Project data center. Microsoft has reached a multibillion-dollar partnership with Mistral. The report also said AI infrastructure finance is turning into a “supercycle” spanning credit markets and private credit, with Anthropic advancing a $35 billion infrastructure financing package tied to Broadcom. At the same time, total stock sales in the U.S. equity market have exceeded $300 billion this year, much higher than expected, adding to liquidity pressure.
Alphabet: strong quarter, weaker reaction
Alphabet fell 1.46% in regular trading and nearly 3% after hours. Second-quarter revenue and profit both beat expectations, and Google Cloud remained strong, with cloud backlog above $514 billion. The stock still fell because the company raised its full-year capital expenditure outlook to $195 billion to $205 billion and reported negative free cash flow for the first time. The concern was not whether Google is making money. It was whether revenue growth can keep up with a rapidly expanding AI data-center bill.
Tesla: revenue up, profit down
Tesla closed down 1.30% and dropped 5% after hours. The company reported 26% revenue growth in Q2, but price cuts and promotions drove profit down 18%, well below expectations. Free cash flow also turned negative for the first time in more than two years. Elon Musk said Tesla is in a major investment year for robotics, autonomous driving and AI infrastructure, and acknowledged that Optimus may be the hardest product to scale into mass production. Pressure spread across related names, with XPeng down 3.60% and NIO down 2.51%. Among megacap technology stocks, Apple fell 0.56%, Amazon lost 1.09%, Meta dropped 2.58% and Microsoft declined 1.86%.
AMD and Broadcom extend the AI infrastructure trade
AMD rose 1.45% after striking a strategic partnership with Anthropic that includes plans to invest up to $5 billion and secure tens of billions of dollars in AI server orders. Anthropic plans to begin purchasing as much as 2 gigawatts of AI servers powered by AMD Instinct MI450 chips starting in the first half of 2027.
Broadcom gained 2.67%. Wall Street banks have started trading the initial part of a $35 billion financing package tied to Broadcom and Anthropic’s AI infrastructure expansion. The report said private credit participation is among the largest seen in recent years. As a core supplier of AI chips and networking gear, Broadcom continues to benefit from data-center buildouts by large-model companies.
Hardware names outperform, led by Super Micro Computer
Super Micro Computer surged 19.84%, making it one of the session’s strongest AI hardware stocks. The company expects fourth-quarter gross margin of 15% to 17%, nearly double its earlier guidance of 8.2% to 8.4%. New orders for the quarter topped $60 billion, a record high. The move lifted the broader hardware and equipment complex, with Dell Technologies jumping more than 9% for its biggest one-day gain in nearly two months.
Micron Technology fell 1.17%. Even so, Bank of America remains positive on the long-term HBM market and expects it to expand from about $35 billion currently to $246 billion by 2030, roughly a sevenfold increase. It also raised its Micron price target to $1,550. Other storage names were mixed: Seagate rose 1.82%, Western Digital gained 1.51%, SanDisk added 0.62%, while SK Hynix fell 3.88%.
IBM, ServiceNow, Palantir, SpaceX and Intel also draw attention
IBM lost 2.25% in regular trading but was up about 5% after hours at one point. Second-quarter revenue missed expectations and the company cut its full-year revenue growth outlook. Still, because IBM had issued a profit warning a week earlier and had previously plunged more than 25%, the after-hours move looked like a relief rebound.
ServiceNow dropped 6.47%. Its Q2 results showed revenue up 24% year over year and subscription revenue up 24.5%, while the stock rose 5% in late trading. Texas Instruments separately reported Q2 revenue above market expectations, with its CEO saying industrial, data-center and automotive demand drove growth.
Palantir fell 6.10% after a UK regulatory development. The UK Statistics Authority asked NHS England to qualify claims about the effectiveness of Palantir’s software and acknowledge that current data does not prove the software is effective.
SpaceX slid 6.70% to a new low since listing. The company is scheduled to release second-quarter results after the close on Aug. 4, after which the first insider and employee lockup expiration will be triggered, potentially involving as many as 911.5 million shares. The market is worried about selling pressure. S3 Partners estimates about 206 million SpaceX shares are currently sold short, equal to around 32% of free float, with the short position valued at about $25 billion. The company is also preparing for a Starship launch as early as local time July 23, though weather remains a key uncertainty.
Intel fell 2.68%. The company said it will carry out another round of layoffs in its data-center division in a move aimed at simplifying operations and improving efficiency. Over the past four years, Intel’s workforce has been cut by nearly 40%. Investors are focused on whether the company’s after-hours earnings can show that its turnaround is getting back on track.
Four near-term events are now in focus
At 20:15 on July 23, the European Central Bank will announce its rate decision, followed by a press conference from Christine Lagarde. The market expects no change, but hawkish language on inflation, liquidity withdrawal or eurozone growth risks could move the euro and global bond markets and indirectly affect the dollar index and U.S. equity valuations.
At 20:30 on July 23, the U.S. will release weekly initial jobless claims. The market expects about 214,000. A number well below that would suggest the labor market remains tight, making it harder for the Federal Reserve to pivot to easing, which would be negative for Treasuries and high-valuation technology shares. A hotter claims print would reinforce slowing-growth trades, support Treasuries and weigh on banks, energy names and cyclical stocks.
At 00:30 on July 24, AMD will hold its Advancing AI event, where CEO Lisa Su is set to speak. Investors will be watching for details on MI450, the Helios rack-scale platform, the pace of Anthropic orders and the broader AI server ecosystem. If AMD can improve visibility on orders into and around 2027, second-tier AI chip names could be repriced.
At 05:00 on July 24, Intel will host its Q2 earnings call. Investors will be looking for updates on the scale of layoffs, the data-center business, gross-margin recovery and capital spending discipline. Any new comments on AI accelerators, advanced process technology or foundry customers could affect rotation across semiconductor stocks.