Historic Drop in Alphabet Shares Drags Down US Markets

Alphabet shares experienced a historic 12.6% decline after the company's summer growth fell short of analyst expectations and its artificial intelligence investments raised cost concerns. This drop dragged down US markets, causing the S&P 500 and Nasdaq indices to decline.

Shares of Google and YouTube parent Alphabet suffered their worst day on Wall Street since trading began over 20 years ago as summer growth came in weaker than expected for the final quarter, with Class A shares falling 12.6%. As concerns grew over whether the company's massive spending on artificial intelligence technology would pay off, it was reported that cash burn accelerated as purchases of property and equipment exceeded $51 billion.

The sharp drop in Alphabet overshadowed an otherwise positive day in which more than three-quarters of the stocks in the S&P 500 rose. The S&P 500 lost 0.3% to fall to 7,720.39, ending a four-day winning streak. The Nasdaq composite dropped 1.4% to 26,184.72, and the Dow Jones Industrial Average fell 132.54 points to 52,342.56.

Meanwhile, numerous companies such as KLA Corp, Eli Lilly, Mastercard, Merck, DoorDash, and Norwegian Cruise Line Holdings rallied with better-than-expected earnings and revenue reports. DoorDash rose 5.6% after announcing an agreement to acquire Instacart in a deal valued at $17 billion.

In the bond market, the yield on the 10-year Treasury note fell from 5.05% to 4.94% following mixed reports on the US economy. The price of Brent crude oil dropped 0.8% to $110.80 a barrel, European stock markets rose after the European Central Bank held interest rates steady, and Asian markets traded mixed.