Nasdaq, S&P 500 Reach Record Highs on Alphabet Earnings; Dow Jones Drops Amid Mixed Market Signals

The major U.S. stock indexes closed with mixed results as investors reacted strongly to earnings announcements from top corporations. Both the Nasdaq Composite and S&P 500 hit all-time highs, propelled by Alphabet's impressive Q2 results, while the Dow Jones Industrial Average slipped, driven by underperformance in key blue-chip stocks.

On July 24, the Dow Jones Industrial Average fell sharply by 316.38 points (0.70%), settling at 44,693.91. In contrast, the S&P 500 added 4.44 points (0.07%) to reach a record 6,363.35, and the Nasdaq Composite advanced by 37.94 points (0.18%) to a historic close at 21,057.96.

Alphabet's Stellar Q2 Performance Ignites Tech Surge

Alphabet's second-quarter results sparked renewed investor enthusiasm for the tech sector. The company reported a 14% annual increase in revenue, climbing to $96.428 billion, while earnings per share (EPS) surged 22% to $2.31—both metrics exceeding Wall Street's expectations.

This strong performance lifted major technology stocks with valuations exceeding $1 trillion, excluding Apple and Tesla, which recorded average gains of 1%. Alphabet’s results also signaled growing market optimism about the potential for artificial intelligence (AI)-driven growth.

Ross Mayfield, an investment strategist at Baird, stated, "Alphabet’s results underscore the viability of AI investments translating into meaningful returns. Their earnings offer fresh data to support the rally, at least for the early stages of this reporting season."

Tesla Shares Fall Over 8% Amid Weak Results and Pessimistic Forecasts

Tesla experienced a sharp selloff, with its stock plunging over 8% following weaker-than-expected Q2 earnings and a bearish outlook from CEO Elon Musk. The EV maker reported a year-over-year revenue decline of 12%, amounting to $22.5 billion, alongside a 23% drop in EPS to $0.40—failing to meet analysts' expectations.

During the earnings call, Musk warned of "challenging quarters ahead," hinting at potential operational hurdles until the anticipated launch of its large-scale autonomous driving initiative in late 2024.

Dow Suffers from Weak Showings in IBM, UnitedHealth, and Honeywell

The Dow Jones Industrial Average’s decline was largely driven by underwhelming performance from IBM, UnitedHealth Group, and Honeywell International.

IBM, despite beating Wall Street estimates for Q2 revenue and EPS, saw its stock decline due to concerns that its hefty YTD rally had already priced in excessive optimism. UnitedHealth shares tumbled 4.76% after the Justice Department announced an investigation into its Medicare-related operations. Similarly, Honeywell shares dropped 6.18%, impacted by weaker-than-expected margins reported for the quarter.

Chipotle Shares Plunge Following Q2 Sales Miss

Chipotle Mexican Grill faced a steep 13% drop in its stock—the company's largest single-day decline since October 2017. The selloff followed a disappointing Q2 showing, during which same-store sales figures came in below Wall Street expectations.

Trump Visits Federal Reserve, Calls for Renewed Rate Cuts

In a rare appearance by a U.S. president, Donald Trump visited Federal Reserve headquarters alongside Chair Jerome Powell to observe ongoing renovations. During his visit, Trump reiterated his stance advocating for interest rate cuts, reigniting debates over monetary policy adjustments.

Economic Data Reflects Service Sector Resilience, Manufacturing Weakness

Economic indicators revealed a growing disparity between the strength of the U.S. services sector and the ongoing contraction in manufacturing.

S&P Global's preliminary U.S. Services Purchasing Managers' Index (PMI) for July hit 55.2, surpassing June's 52.9 and reaching its highest level since December. Meanwhile, the Manufacturing PMI fell to 49.5 from June's 52.9, marking the first contraction since December 2024.

Fed Rate Expectations Steady Despite Market Volatility

According to the CME FedWatch Tool, markets maintained a 60.4% probability of a 25-basis-point rate cut by September, unchanged from prior estimates.

Volatility Index Inches Higher

The CBOE Volatility Index (VIX), widely regarded as Wall Street's "fear gauge," ticked up slightly by 0.02 points, closing at 15.39. This marginal increase reflects minor market apprehension amid earnings season and economic policy discussions.

With major earnings announcements continuing to shape investor sentiment, the stock market remains in flux, balancing tech-driven gains against broader challenges in traditional sectors.